Stablecoins Are Not the Future. Here's What Paris Blockchain Week Missed

PBW is as always a great temperature check on the industry Paris Blockchain Week (PBW). This year, the excitement over stablecoins seemed overwhelming. Were they simultaneously touted as the solution to modernizing payments, particularly in the realm of cross-border payments? Absolutely. Did I buy it? Not entirely. Honestly, I believe the intense focus on stablecoins really masked some critical discussions that we needed to be happening.

Regulatory Chaos: The Elephant In The Room

At PBW I felt a big gap. Despite all this, many people appeared completely optimistic about the current regulatory minefield stablecoins find themselves in. Okay, everyone knows it’s regulation, but they don’t tell you just how deep the uncertainty goes. And we’re not just speaking about a quilt-like set of regulations across states. You just can’t establish a security-sensitive, global payment rail with that type of jittery, insecure substructure.

Consider it like attempting to build a tall smokestack atop liquefied natural rug. France may be taking the lead on this front within the EU, but how about in the US? Asia? This patchwork of global harmonization fuels friction, drives up compliance costs and in turn makes achieving global scaling all the more difficult. This unrelenting threat of regulatory retaliation sends many companies into a state of needless anxiety. Let’s face it, not very few if any companies can thrive in that kind of environment.

Centralization's Siren Song: A False Promise?

Here's where I get genuinely concerned. We, the blockchain community, champion decentralization. Most stablecoins, specifically the ones taking off the fastest, are inherently centralized. Isn't that ironic?

Consider this: a single entity controls the issuance and redemption of these tokens. They can freeze individuals’ accounts, censor specific transactions, and perhaps most powerfully of all, control the flow of value. It’s the complete opposite to the original crypto ethos.

It’s like swapping one set of gatekeepers (big banks) for a new one (stablecoin issuers). Where's the real innovation? Where's the empowerment? We’re really just swapping one centrally-controlled, oligopoly-run digital dollar for another — albeit with a prettier, blockchain-tinged facade. That should outrage every cypherpunk.

CBDCs Loom: The Real Game Changer?

All this stablecoin talk conveniently ignores the elephant in the room: Central Bank Digital Currencies (CBDCs). As the stablecoin hype train continues to chug along, governments around the globe continue working behind the scenes on their own digital currencies.

Think about it. Now, imagine what occurs when the world’s real central banks begin to issue digital versions of their fiat currencies. If this is true, will stablecoins — particularly those backed by fiat — continue to be as attractive?

I suspect CBDCs will eventually crowd out stablecoins in terms of adoption and use. They get tremendous top cover from national administrations. Yet, they enjoy the weight of the authority of well-established legal frameworks and the trust that results from being supported by the central bank. The writing is on the wall.

The real future is moving away from fiat and not replacing it with stablecoins issued by private firms. It’s less about replacing crypto itself, and more about enhancing fiat and its future potentials. That’s a much more inspiring and, quite honestly, achievable vision.

Yet in its sharp and laudable focus on stablecoins, PBW, as the title suggests, missed the bigger picture. It would be the equivalent of fixating on the internal combustion engine while passing on an opportunity to advance electric vehicles. Stablecoins are a part of payment today’s infrastructure but they likely will not rule the future of payments. We must expand our imaginations, consider other possibilities, and make plans for a future in which CBDCs are ubiquitous. The future is fluid, it’s virtual, and it’s top-down.