Building A National Stablecoin Strategy
Originally published via OMFIF
Stablecoins will bring a host of economic benefits for countries
Countries worldwide have an opportunity to strengthen their positions as financial centres by establishing themselves as hubs for stablecoin transactions. Two complementary strategies would bring substantial economic benefits: enabling domestic financial institutions (regulated banks and non-banks) to receive and convert foreign stablecoins; and promoting global acceptance of locally issued stablecoins.
These forward-looking policies would generate significant fee and foreign exchange revenue for financial institutions, ensure proper regulatory oversight of digital currency flows, create diversified demand for government debt and reinforce a nation’s role as an innovative financial centre in the global economy.
Inbound stablecoin conversion
A global stablecoin clearing system would enable a country’s financial institutions to receive stablecoins from foreign issuers and convert them to local currency at par value.
If financial institutions were able to capture just 5% of the hypothetical $1tn global stablecoin redemption flow, this could generate approximately $1.83bn in annual gross revenue for the domestic financial sector. This would create a new revenue stream for banks and regulated fintechs without requiring them to take principal risk. Processing occurs through existing regulatory frameworks similar to how foreign currency cheques are handled today through international cash letter arrangements.
There are several regulatory benefits to this strategy. It ensures all foreign stablecoin flows into the country are processed through regulated institutions with robust know-your-customer, anti-money laundering and sanctions controls. It prevents disintermediation of domestic financial institutions by unregulated offshore stablecoin platforms and unhosted wallets. And it provides regulators with visibility into digital currency flows entering the economy.
This strategy also creates a foundation for bilateral trade negotiations: ‘We’ll facilitate acceptance of your stablecoins on a national level if you’ll do the same for ours.’ It positions the country as a forward-thinking jurisdiction embracing digital currency innovation within regulatory guardrails, and strengthens its competitive position against other financial centres hesitant to engage with digital assets.
Outbound national stablecoins
Promoting global acceptance of locally denominated stablecoins creates international demand for digital national currency, with significant macroeconomic benefits. Locally issued stablecoins held overseas indirectly generate demand for domestic government debt (as backing assets). This creates a new channel for the national currency to act as a reserve currency in digital form and broadens the utility of the domestic currency in international trade and cross-border transactions.
Consider consumers purchasing from overseas merchants through global marketplaces. These substantial payment flows could be denominated in local stablecoins, which many overseas marketplace sellers would willingly hold as part of a diversified currency portfolio. This creates sustainable foreign demand for domestically denominated assets without requiring immediate settlement back to the seller’s local currency.
This strategy extends the country’s financial influence in the growing digital economy, reduces transaction costs for domestic businesses engaged in global trade and provides a complementary digital currency strategy alongside any potential future central bank digital currency initiatives.
Policy recommendations
About Ubyx
Ubyx is the clearing layer for stablecoins designed to deliver universal redemption at par, enable cash-equivalent accounting treatment, and provide a mutualized global acceptance network across bank and non-bank financial institutions. It preserves the singleness of money on public blockchains and gives stablecoin issuers universal distribution through a neutral, openly governed ecosystem. The Ubyx Association enables participants to shape actionable strategies for stablecoin ubiquity both within and beyond their organizations.
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