What Stablecoins Teach Us About the Future of Money

Stablecoins are the subject here, but the final question is larger than whether a token can move faster than a bank transfer. The evidence asks whether privately issued digital money can deliver useful payment innovation while preserving trusted settlement, elastic liquidity, financial integrity and monetary sovereignty. The answer is conditional: stablecoins can create real convenience and competition, yet their macroeconomic and financial consequences depend on who holds them, what backs them, how redemption works, how banks and governments adjust, and which outcome is being measured.

The right answer depends on the question being asked

There is no single “stablecoin effect.” There are several effects that can point in different directions because a stablecoin performs several roles at once. It is a token recorded on a ledger, a liability of an issuer, a liquid asset in a holder’s portfolio, a claim supported by reserves, a potential competitor to bank deposits, a possible buyer of public debt and, when used abroad, a foreign-currency instrument. A judgement that looks only at payment speed sees one role and mistakes it for the whole system.

The payment case is real but narrower than the strongest claims made for it. Programmable ledgers can combine instructions, records and settlement, support automated actions and enable atomic exchange. These functions may reduce reconciliation and pre-funding and can be useful for certain cross-border or financial-market transactions. Yet the BIS Annual Economic Report 2026 says that stablecoins’ main use to date has been on-chain crypto trading, with a smaller role as an offshore store of value. Cross-border transfers can become less attractive once fees, spreads and on- and off-ramp costs are included. The technology may be capable of a use that the present market has not yet demonstrated at general scale.

The macroeconomic case is similarly conditional. A stablecoin expansion can pressure bank lending because households substitute away from deposits and banks must pay more for funding. It can also support fiscal space when issuers buy Treasury bills, raising their prices and lowering short-term government borrowing costs. The first channel tends to reduce loan supply and firm investment; the second can allow lower distortionary taxes or higher public spending. Neither channel is a moral verdict. One describes the cost of reallocating private funding, the other the possible benefit of changing sovereign financing conditions.

The working paper’s baseline US calibration makes the tension measurable. With privately owned stablecoins backed by Treasury bills and held by domestic households, a hypothetical $2 trillion adoption level lowers long-run output by about 0.03% because the bank-lending channel slightly outweighs the fiscal-space channel. That is a small net output change, not a small change in every balance sheet. At the same adoption level, the model reports a Treasury-bill yield decline of almost 25 basis points and substantial shifts among cash, deposits, stablecoins, bank assets, firm debt and equity, and government maturities.

The same model also shows why output cannot be the only measure. Stablecoins provide liquidity, transaction and safety services that households value. Once those services are included in household utility, the baseline welfare effect becomes positive even though consumption and output fall slightly. This does not establish that every group benefits. Borrowers can face higher loan costs, banks can lose a cheap funding source, equity holders can absorb more business risk, and the public sector can lose cash seigniorage or become more reliant on short-term debt. A positive household welfare result and a negative output result can coexist because they answer different questions.

Time adds another difference. Treasury demand can affect public financing as soon as markets reprice, while firms’ long-term debt and installed capital adjust more slowly. In the model, a transition to $2 trillion adoption raises output to roughly 0.3% above the initial steady state after about three years before the slower credit effect is fully felt. That temporary expansion is not evidence of a permanent productivity gain, just as the modest long-run decline is not evidence that the payment instrument has no value. A serious claim must state the comparator, adoption path, horizon and outcome.

The sign can change when the design or the surrounding economy changes. Requiring issuers to hold half of their reserves in bank deposits leaves the household deposit response largely intact, weakens Treasury-bill demand and makes the $2 trillion long-run output decline almost 0.07% in the model. Representing half of backing as unremunerated central-bank reserves sends seigniorage-like income to the public sector and changes the same output effect to about +0.02%. A 50% foreign share of demand changes the local funding effect; at $2 trillion total adoption, the reported long-run output effect becomes about +0.04%. High public debt or a larger Treasury-bill share can also make fiscal space more important. These are not competing facts. They are branches generated by different assumptions.

The strongest conclusion is therefore not that stablecoins are good or bad for the economy. It is that stablecoins make the allocation of liquidity visible. A token can move risk from bank deposits to wholesale funding, from private issuers to Treasury markets, from domestic money to a foreign currency, or from public seigniorage to private profits.