Stablecoins: Types and Applications

StablecoinsStablecoins are digitalDigital tokens that aim at “stabilising major currencies directly in the market for cryptoassets”. StablecoinsStablecoins are built on a set of stabilization tools that classify them as tokenized funds, off-chain collateralized, on-chain collateralized and algorithmic. The paper provides a detailed overview of the different stabilization mechanisms supported by examples of international market applications. In addition, the paper distinguishes between private-issued and state-issued stablecoinsStablecoins and discusses current developments in Switzerland and China. Finally, the paper concludes with a discussion on the major advantages and challenges related to the implementation of stablecoinsStablecoins. The paper recognizes the advantages of stablecoinsStablecoins for the underbanked people and cross-border payments as well as acknowledges the challenges related to the establishment of an internationally coordinated legal framework and enforcement on stablecoinsStablecoins.