Trends Report

Demystifying Stablecoins: They Can Have An Important Role In The Financial System If They’re Designed And Governed Appropriately

December 22nd, 2020
Martha Bennett, VP, Principal Analyst
Martha Bennett VP, Principal Analyst
With contributors:
Laura Koetzle , Melissa Chaudet , Clarissa Skinner

Summary

One of the most common questions Forrester receives from digital business professionals and technologists working on blockchain-related projects is “What are stablecoins exactly?” This research provides the information they need. Unlike a pure cryptocurrency like Bitcoin, a stablecoin is backed by an asset. The underlying asset can take many different forms, and stablecoins exist in both regulated and unregulated environments. Facebook’s announcement in 2019 that it planned to launch a cryptocurrency, Libra, woke global regulators up to the potential risks of a privately issued coin that could be used globally. Regulation specific to stablecoins is inevitable. Established financial services institutions are also working on various “coins” for wholesale payments and settlement. Confusingly, reports often describe these coins as “stablecoins,” while banks typically insist on describing them in terms more aligned to existing banking terminology. If you need a roadmap to the confusing constellation of technologies around blockchain, start here. To dive deeper, schedule an inquiry with Martha Bennett or Charlie Dai.

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