Coming to this subject as a naive reader, I have to ask why anyone would issue a private Stablecoin in the first place. Unless you’re trying to profit disreputably by facilitating money laundering or otherwise acting as a “shadow banking system,” what could be the source of the utility?
What Gorton and Zhang say is: “Stablecoins are a new form of private money that can add value in cross-border transactions for firms and banks.” I.e., Stablecoins can serve as a common denominator for countries using different currencies.
This seems a modest but valid role for Stablecoins. It does NOT require them to “be like money” or to satisfy the NQA principle across an entire society.
At the other extreme, we have 1) Facebook—a company that has always shown the naked ambition to become or replace society—deciding to conduct its business within an FDIC-insured bank and thus make its Diem coin ultimately indistinguishable from the US dollar…
Or 2) the issuer of another prominent Stablecoin, Tether, found to be less than honest about the backing of their virtual currency, with the apparent motive NOT of “adding honest value” to a transaction but playing digital three-card-Monty and moving “the value” around so quickly that no consumer can say for sure where it really is at any given moment.
I agree that the interests of the Feds may at times be in conflict with the interests of the States, but if the sovereign can’t dictate the terms of the money supply, there’s no basis for being the sovereign.
So my naive question is: Beyond the function of “adding value in cross-border transactions,” what is the utility of issuing and using Stablecoins in the first place?