With JPM Coin and other stablecoins growing in popularity as of late due to being pegged to USD or other fiat currencies and not facing the normal volatility we see with coins like Bitcoin, Ethereum, etc., they also bring with them a road that cryptocurrencies originally attempted to avoid: centralization.

A Single Issuer

The biggest concern with stablecoins is that they have to have a single issuer. The reason for this is simple: if everyone had the ability to mint more, there would be no value, and if no central party could mint more (like Bitcoin), there would be no way to peg them to USD properly. Decentralizing them would come with an inherent problem, which is how to keep them stable across every possible exchange – it would require everyone to continually agree that they are worth an exact value, and the simple fact is that this isn’t going to happen. Even in the case of Tether, which is now facing its own controversy yet again, the value fluctuates throughout the day – and that one is supposed to be pegged to $1 per coin with the creators backing it with cash and releasing only enough coins to cover their current reserves.

The point of Bitcoin and others has always been partially to avoid the printing of more money, leading to a deflationary setup instead of inflationary. A central party running things and releasing the coins just leads to a situation where a lot of oversight is needed and a lot of trust must be given because they end up being a single potential point of failure for the entire system.

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Are All Stablecoins Bad?

This is going to be a “no,” but with a caveat: they need to be regulated. One of the strongest benefits of Bitcoin is that it is outside the control of any single group, instead giving the power to those who utilize (and mine) it. In the case of stablecoins, this just isn’t feasible. And with that comes the absolute need for real regulation on them. If you deposit cash into a bank, you do so with the understanding that if the bank goes down, they or the government will refund the losses (at least with the FDIC). With cryptos, we simply don’t have that luxury. This essentially means that they need to be treated as a form of cash in regards to stablecoins if they are going to truly be trustworthy and remove any doubts as to whether or not they can be cashed in and utilized as intended.

JPM Coin, a coin being launched by the bank JPMorgan, is probably the closest we have to having a stablecoin that is regulated properly. And even that one has its doubts, especially being that the company’s CEO was historically against cryptocurrencies for quite some time.

As the stablecoin arena expands and grows, we will keep you updated on the progress and what you need to know if you plan to get involved! In the meantime, know that as of this writing, there is nothing stable enough to 100% trust.