IMF: 'Stablecoins a threat to banking and cash'

Stablecoins are a serious threat to the traditional banking system, dollars, euros and other fiat money. That's something the International Monetary Fund (IMF) is warning for in a newly released paper titled 'The Rise of Digital Money'. They believe there's a real chance that cash and bank deposits will 'face tough competition and could even be surpassed' by emerging digital commodities like stablecoins.

IMF believes stablecoins are a threat to the traditional money system because of their steady value and direct connection with cryptocurrencies. Where Bitcoin fluctuates heavily in value, stablecoins remain a safe haven. But IMF warms for the shaky way stablecoins are pegged.

"Providers of managed coins can also run out of assets to support the price of their coins, especially because they may stand on shaky fundamentals—use determining value, and value encouraging use." - IMF, The Rise of Digital Money (2019).

The International Monetary Fund sees a role for central banks to regulate and institutionalize stablecoins. They also suggested that central banks could partner with emoney companies and create a digital version of cash, a so-called central bank digital currency (CBDC).

Interestingly the cryptocurrency world is embracing elements from traditional banking. The Proof-of-Stake algorithm rewards users for not touching their coins, comparable with interest in the banking system. One of the biggest cryptocurrencies in world, Ethereum, is making the switch from Proof-of-Work mining to Proof-of-Stake later this year.

While the stablecoin Tether just announced a fifth version of its blockchain that's also based on consensus through something they call Pure Proof-of-Stake. Tether is currently available on five different blockchains, including Bitcoin, EOS, Tron and Ethereum.