The debate over how money should move in the digital age is often framed as a clash between crypto evangelists and cautious central bankers. But listen closely to economist Rhys Bidder and the boundaries blur. In a wide-ranging conversation on the BFRR – Bitcoin, Fiat & Rock’n’Roll podcast, Bidder, a lecturer at King’s Business School and former researcher at the Federal Reserve Bank of San Francisco, argues that stablecoins are forcing finance to revisit first principles—sometimes uncomfortably, often fruitfully.
From Bank Stress Tests to Blockchain
Bidder’s journey into digital assets did not start with Bitcoin, but with bank fragility. His early research focused on decision-making under uncertainty and stress testing in the wake of the 2008 financial crisis. That vantage point made him sympathetic to the strengths of traditional banking—and acutely aware of its weaknesses. “There’s a lot of good,” he notes, “but also a lot of fragility.” The path from balance sheets to blockchain, he suggests, runs through a simple question: what backs our money, and how does it settle?
Stablecoins as “Narrow Banks”
On the asset side, many stablecoins look familiar. By holding cash, reserves and short-dated government securities, they resemble so-called narrow banks, avoiding the riskier loan books of traditional banks. That design tempers credit risk and run risk. Yet the resemblance ends there. What sets stablecoins apart is not their assets but their settlement model: they transfer as bearer instruments on shared ledgers, without routing through central bank real-time gross settlement (RTGS) systems. For cross-border payments, that could be a breakthrough. For regulators, it is a governance headache.
The Singleness of Money Problem
Here the Bank for International Settlements’ favorite concept—“singleness of money”—comes in. Within domestic systems, a pound is a pound everywhere, enforced by central bank settlement. Stablecoins, however, can trade away from their peg. Deviations of 0.999 or 1.001 to the dollar may look trivial, Bidder argues, and could be hidden from users by payment intermediaries. But sharp moves, like USDC’s wobble during the Silicon Valley Bank crisis, threaten trust in the monetary anchor. The solution, he says, should be familiar: emergency liquidity support. If issuers really hold safe collateral, central banks should lend against it—though globally coordinated rules remain a daunting task.
Do Stablecoins Undermine Monetary Policy?
A second regulatory worry is that stablecoins might weaken monetary policy transmission. If tokens pay no yield, policy rate changes cannot influence holders’ behavior. But Bidder notes that stablecoins backed by short-term Treasuries could, in theory, pass on rates more directly than bank deposits, where spreads and balance sheet health dilute the signal. “Let them pay interest,” he suggests—while acknowledging the political sensitivities of central banks remunerating non-banks. A bolder idea—reserves-backed stablecoins with direct central bank accounts—deserves exploration, he adds.
Dollarization and the Global Risk
For Bidder, the more serious risk is not singleness or interest rate pass-through, but dollarization. In smaller economies, widespread use of dollar stablecoins could hollow out monetary sovereignty. That, he argues, is a constructive debate regulators should have. Technical tools—such as purpose-bound tokens or smart-contract wrappers—might help enforce local rules without blocking innovation. What’s missing is international coordination: the kind of painstaking work that created CLS in foreign exchange, now applied to digital settlement assets.
A Future Beyond Dollar Dominance?
Despite today’s reality—99% of stablecoins denominated in U.S. dollars—Bidder is not convinced the dollar-only future is inevitable. In Europe, where invoices, salaries and savings are in euros, he expects demand for euro-denominated stablecoins to grow, especially for retail and SMEs. The challenge is less about user demand than about nurturing European issuers and regulatory frameworks that make issuance viable. “It’s within Europe’s power to take hold of their own fate,” he stresses.
A Pragmatic Path Forward
Bidder’s message disrupts tribal narratives. Stablecoins are neither panacea nor menace; banks are neither obsolete nor sacrosanct. The challenge is pragmatic: preserve the strengths of public money and central bank safety nets, while harnessing the speed and composability of new rails. Settlement, more than collateral, is where the real innovation—and the real risks—lie.
In his view, regulators must shift from rejecting stablecoins outright to shaping them into safer, standardized tools. That means emergency liquidity frameworks, technical standards, and global coordination. In short: not just debating whether stablecoins should exist, but deciding how they should fit into the architecture of modern money.
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