Blog: Are Stablecoins and DeFi taking us "Back to the Future?"

Last week the US Congress passed laws which regulate and legitimize an area of cryptocurrency: Stablecoins. Stablecoins were created to combat the volatility of cryptocurrencies, such as Bitcoin, by backing the digital tokens with other, more recognized assets such as the US Dollar and gold. I've written in the past about my disdain for Bitcoin and the like which I felt had no practical uses aside from speculative trading. It has been pointed out to me that developing countries often find Bitcoin more stable than their own currencies, which is true. But the real applications of digital currencies seem to rest with stablecoins which are often are used for cross-border transactions at low cost and other real world applications.

Oddly stablecoins take us back to earlier currencies which were generally backed with gold. That system became so dysfunctional that the global currency system shifted to fiat currencies. Fiat currencies are backed by the faith and credit of the issuing government while cryptocurrencies are backed with nothing. So stablecoins are an improvement in that regard. But there is another thing about stablecoins which is disturbingly familiar.