Barry Eichengreen, Berkeley professor of economics and former advisor to the International Monetary Fund, published an article criticizing stablecoins. He claimed that their stability is a myth and that only those with insufficient experience in cryptocurrency policy will believe it.
Barry Eichengreen: “Stablecoin collateral does not reflect reality.”
According to Eichengreen, stablecoins such as Tether (USDT) and Gemini Dollar (GUSD) are pegged one-to-one to the US dollar to provide price stability that Bitcoin and other cryptocurrencies lack. This lack of volatility is supposed to guarantee their reliability as stores of value as well as accounts. Eichengreen believes this stability cannot be guaranteed as it stands. First, for fully collateralized stablecoins like Tether, the project must equal every token in circulation, but may not have the dollar deposits it claims.
Also, a fixed exchange rate in dollars compared to a regular dollar means that investment in stable debts is not that attractive. Eichengreen thinks these currencies may not be valuable in the long run as it is unclear whether the model will scale or governments will allow it. The flaws of these new fashion investments will leave them vulnerable to speculative attacks at fixed exchange rates, Eichengreen said, so he warned everyone he knew.
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