The Bank for International Settlements (BIS) conducted a comparative analysis between stablecoins and fiat currencies and concluded that the stablecoin market needs a unified ledger and global regulation by a central bank or equivalent structure. on one's own.
BIS's analysis is in a report called "On par: A Money View of stablecoins" to identify the weaknesses of the payment mechanism in stablecoins compared to fiat money. The study's key finding is that an operating model in which regulations are handled by a central bank is superior to a model that relies on private lenders.
According to analysts, stablecoins lack important mechanisms to ensure currency market stability. In particular, this is an issue about loans that central banks issue to private banks during times of financial instability.
The report cites the situation arising from the 2008 financial crisis as an example. At that time, the Federal Reserve pumped in $600 billion in liquidation exchanges with other central banks, supplying withdrawal demand and supporting the nominal value of the dollar.
In contrast, stablecoins are backed by fiat reserves and securities, digital assets, and algorithmic trading protocols. But the main drawback of this system is the mistaken perception that the liquidity of stablecoin issuers (the ability to meet long-term demand) comes at the expense of liquidation costs (the ability to meet long-term demand). short-term demand).
Furthermore, the majority of reserves that provide value to stablecoins represent “the equivalent value of short-term safe USD assets” that are inevitably tied to the cash market. Therefore, the stability of stablecoins is closely linked to current economic conditions. However, while the traditional financial system has mechanisms to help maintain bank liquidation during economic crises, stablecoins lack such mechanisms.
Summing up, BIS analysts recommend using the Regulated Liability Network or RLN to create a “full-fledged banking system” for stablecoins based on a single ledger, with the central bank as the regulator . This will allow stablecoins to gain trust from institutional investors, something that private stablecoins lack.
In July this year, the proof-of-concept phase of work on the Regulated Liability Network (RLN) was successfully carried out by experts from the Bank's New York Innovation Center (NYIC). Federal Reserve of New York, with participation from SWIFT and nine major financial institutions. In September, British authorities also announced plans to begin pilot testing of a digital pound on the RLN infrastructure.