{"id":5155,"date":"2020-04-18T11:14:05","date_gmt":"2020-04-18T15:14:05","guid":{"rendered":"https:\/\/cointelegraph.com\/magazine\/?p=5155"},"modified":"2020-04-18T18:59:02","modified_gmt":"2020-04-18T22:59:02","slug":"fsb-epic-fail-ethereum-nailed-it","status":"publish","type":"post","link":"https:\/\/cointelegraph.com\/magazine\/2020\/04\/18\/fsb-epic-fail-ethereum-nailed-it","title":{"rendered":"Financial Stability Board’s Epic Fail \u2014 Ethereum Nailed It"},"content":{"rendered":"
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\u201cBe careful of stablecoins\u2026 they may cause instability!\u201d<\/b><\/h3>\n

Very much in line with its name, the Financial Stability Board (<\/span>FSB<\/span>) \u201cpromotes international financial stability.\u201d<\/span><\/p>\n

At least, it’s supposed to.<\/p>\n

The group could never be accused of sitting on its hands. It has three committees, all standing, charged with the responsibilities of assessing risks, measuring global cooperation, and monitoring the implementation of agreed-upon standards.<\/span><\/p>\n

Last year, the G20 asked the FSB to examine any risks associated with stablecoins and propose any regulations that might be required to deal with them.<\/span><\/p>\n

Last week, the board <\/span>delivered their findings<\/span><\/a>.\u00a0<\/span>Complete with a set of ten recommendations (an average of about one per month since they began exploring the issue), the FSB made one particular assertion that caught the eye:<\/span><\/p>\n

\n\u201cDuring periods of stress, households in some countries might come to regard [stablecoins] as a safe store of value over existing fiat currencies and exacerbate destabilizing capital flows. Volatile capital flows can have a destabilizing effect on exchange rates and on domestic bank funding and intermediation.\u201d\u00a0<\/span>\n<\/p><\/blockquote>\n

Did I Read That Right?<\/b><\/h4>\n

Yep. The FSB is <\/span>concerned about the instability that stablecoins could pose<\/a><\/span> to national economies, especially in situations where sovereign fiat currencies are failing.\u00a0<\/span><\/p>\n

Wait\u2026<\/span><\/p>\n

Only 13 years ago Zimbabwe had a daily inflation rate close to 100%. Prices doubled every 24 hours. In the mid-90s the former Yugoslavia saw prices double every day-and-a-half. Post-war Hungary saw <\/span>doubling prices every 15 hours<\/span><\/a>. That\u2019s an annual inflation rate of <\/span>4.19 x 10<\/span>16<\/span>%.\u00a0<\/span><\/p>\n

Argentina, Bolivia, Brazil, Nicaragua, and Peru all saw hyperinflation in the 1980s and 1990s. Venezuela\u2019s inflation rate is<\/span> currently <\/span>around 60 million percent<\/span><\/a>.<\/span><\/p>\n

With sovereign fiat currencies serving us so well, it’s clear that currencies that are inherently<\/em> <\/span>stable<\/span><\/i> would be of concern to the Financial <\/span>Stability<\/span><\/i> Board.<\/span><\/p>\n

It also makes one wonder if anyone on the board bothered to look out the window and notice that there\u2019s a pandemic going on, with spikes in unemployment in the worst-hit countries expected to reach Great Depression levels.<\/span><\/p>\n

If that\u2019s not destabilizing, it\u2019s hard to know what is.<\/span><\/p>\n

So What\u2019s Actually Going On?<\/b><\/h4>\n

The FSB, at the request of the G20, equates stability with states and central banks being in control and instability with states and central banks not being in control.\u00a0<\/span><\/p>\n

Control equals order equals stability.\u00a0<\/strong><\/p>\n

Stablecoins – especially if they are global, decentralized, and pegged through algorithms – represent a complete lack of central control.\u00a0<\/span><\/p>\n

To the eyes of the FSB, that looks like instability.<\/span><\/p>\n

What if people start rushing from unstable government-issued currencies to currencies that are stable and under nobody\u2019s control?<\/span><\/p>\n

What if we, the people, don’t particularly like the endless money-printing machine<\/a> that devalues the sovereign currency of our country, and we’d prefer to hedge against the decisions of politicians and bankers who seem only to serve themselves?<\/p>\n

Obviously we can\u2019t have people running around with better ideas.\u00a0<\/span><\/p>\n

That would risk\u2026 instability.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n

Logic: a valuable quality that is difficult to teach.<\/span><\/p>\n

For completely untethering from reality on the threat-to-stability that stablecoins represent, the FSB is this week\u2019s winner of the inauspicious Epic Fail award.<\/span><\/p>\n

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\"Nailed<\/p>\n

Daily Transfer Values on the Ethereum Network Rival Bitcoin<\/b><\/h3>\n

On April 15th, Ethereum <\/span>achieved parity with Bitcoin<\/a> for daily transfer value<\/span>. As noted by analytics firm Messari, it is the first time the Ethereum network has achieved that milestone.<\/span><\/p>\n

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Value transfer on Ethereum just reached parity with Bitcoin.<\/p>\n

This is a story of the explosion of stablecoins in Q1 2020.<\/p>\n

1\/ pic.twitter.com\/noKBvFbgFO<\/a><\/p>\n

\u2014 Ryan Watkins (@RyanWatkins_) April 15, 2020<\/a>\n<\/p><\/blockquote>\n