The Rise of Stablecoins: How Reliable Are They and What Does the Future Hold?

Stablecoins have seen explosive growth, increasing from $17.6 billion to $170.6 billion in just four years. Despite this, questions about reliability and security remain critical.

What is money?

Money = value. When a person buys a chocolate bar, they exchange money for that value. The merchant can then use the money to obtain the value they need in return. Money hasn’t always existed in the form of paper bills or digital currencies. In ancient times, media of exchange included cattle, leather, mollusks, wheat, and salt. Eventually, societies shifted to the gold standard and later to paper money.

The trust model

The shift from tangible value to paper money introduced a key factor: trust. Modern money has value because of collective trust in the government or central authority behind it. Without this trust, money would revert to being worthless pieces of cotton and linen. Despite their acknowledgement, modern national currencies are also prone to issues such as inflation and banking crises.

The future of stablecoins and government action

Currently, stablecoins represent about 1.5% of global U.S. dollar trade. When this figure grows to between 5% and 15%, governments may need to collaborate with stablecoin issuers, creating a regulated environment that merges traditional finance with the growing crypto ecosystem. This approach would support the dominance of the U.S. dollar in international transactions, a key aspect of national interest.

While offering certain advantages, stablecoins are not entirely reliable for long-term wealth storage. Balancing assets among stocks, bonds, cryptocurrencies, and real estate appears to be a more sustainable approach than overly relying on a single type of asset.