The Emerging Autonomy–Stability Choice for Stablecoins

Lawmakers have called for better stablecoin regulation, but authorities tend to have little control over the global operators of distributed ledgers that process stablecoin transactions. This chapter illustrates how peg deviations may occur when the issuer of a fiat-backed stablecoin loses its access to the traditional payment system of the jurisdiction that issues the relevant fiat currency. The need for reliable access to the traditional payment system in order to maintain a stable peg provides an important foothold for regulators to exercise control over fiat-backed stablecoins. Conditional upon regulators having little control over the operators of some distributed ledgers, an autonomy–stability choice may emerge where users of stablecoins ultimately face a choice between regulated stablecoins with a stable value but little autonomy and alternative stablecoin arrangements with more autonomy but a less stable value.