Report from the International Payment Bank on the Role of Digital Assets Linked to Fiat Currency
On June 25, a report from the Bank for International Settlements (BIS) pointed out that digital assets linked to fiat currency have not yet passed three important criteria: consistency, recoverability, and integrity. This leads to the conclusion that these cryptocurrencies cannot yet become a solid pillar of the current monetary system.
Advantages but also Many Limitations
Stablecoin, a type of cryptocurrency linked to fiat assets, possesses high programmability and partial anonymity, helping to reduce cross-border payment costs and accelerate transactions. The role of stablecoin is becoming increasingly clear in cryptocurrency ecosystem entry and exit channels, as well as in countries experiencing severe inflation.
However, stablecoins are difficult to pass tests of recoverability due to their structural characteristics, along with the requirement of full prepayment. The centralized issuance system, lack of standardization, and common payment guarantees seriously weaken the concept of consistency.
Impact on Monetary Sovereignty and Legal Risks
Compared to instruments issued and controlled by central and commercial banks, stablecoins potentially risk undermining national monetary sovereignty and creating momentum for financial crime. Additionally, some cryptocurrency issuers do not strictly comply with Know Your Customer (KYC) and anti-money laundering (AML) regulations, leading to a lack of transparency about system integrity.
Conclusion
Stablecoin should not be viewed as a cash replacement in the traditional economic system. Challenges regarding consistency, recoverability, and integrity have limited the role of this asset in establishing a solid monetary foundation for the future. Continued development and improvement of technical solutions, as well as strict legal frameworks, are necessary for cryptocurrencies to sustainably integrate into the global financial system.
