NY Fed researcher: Stablecoins are not the future of payments

Stablecoins are not the future of payments, and tokenized deposits are a better option, researchers at the Federal Reserve Bank of New York said in a paper published Monday. The researchers were Rod Garratt, professor of economics at UC Santa Barbara, Michael Lee and Antoine Martin, members of the New York Fed's research and statistics group, and Joseph Torregrossa, legal group. They argue that stablecoins are not the best way to move money if distributed ledger technology (DLT) is integrated into traditional finance. "Stablecoins' bundling of security and liquid assets means they cannot be used for other purposes, such as helping banks meet regulatory requirements to maintain sufficient liquidity," the report reads. The paper argues that tokenized deposits are a better payment method , while some practical details need to be worked out, the rationale behind it is simple. Bank depositors will be able to convert their deposits into digital assets (tokenized deposits) that can be circulated on the DLT platform. These tokenized deposits will represent claims on the depositor's commercial bank, just like regular deposits.