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Discussion Paper
The Future of Payments Is Not Stablecoins
Stablecoins, which we define as digital assets used as a medium of exchange that are purported to be backed by assets held specifically for that purpose, have grown considerably in the last two years. They rose from a market capitalization of $5.7 billion on December 1, 2019, to $155.6 billion on January 21, 2022. Moreover, a market that was once dominated by a single stablecoin—Tether (USDT)—now boasts five stablecoins with valuations over $1 billion (as of January 21, 2022; data about the supply of stablecoins can be found here). Analysts have started to pay increased attention to the ...
Discussion Paper
An Interoperability Framework for Payment Systems
Novel payment systems based on blockchain networks promise to redesign financial architecture, but a notable concern about these systems is whether they can be made interoperable. This concern stems from the concept of the “singleness of money”—that payments and exchange are not subject to volatility in the value of the money itself. Volatility and speculation can arise from the payment medium, which may have speculative characteristics, or from frictions that undermine the ability of one or more payments systems to interoperate. In this two-part series, we outline a framework for ...
Discussion Paper
Interoperability of Blockchain Systems and the Future of Payments
In a previous post, we introduced a three-pillar framework for interoperability of payment systems and discussed how technological, legal, and economic factors contribute to achieve interoperability and aid in the “singleness of money”—that payments and exchange are not subject to volatility in the value of the money itself—in the context of legacy systems. In this post, we use the framework to characterize the interoperability of blockchain systems and propose a methodology for evaluating interoperability. We show evidence of limited interoperability and draw insights for the future ...
Discussion Paper
A Lawyer's Perspective on U.S. Payment System Evolution and Money in the Digital Age
Take a close look at something that is widely used by the general public as "money"—a Federal Reserve note, a deposit with a bank, a balance with a nonbank payment company (such as PayPal or Venmo), or perhaps even a cryptocurrency—and ask what it means to use it as a store of value and a medium of exchange. That question is, in essence, a legal one.