Summary: According to a paper published by Gary B. Gorton, a professor at Yale University, and Jeffery Zhang of the Federal Reserve System Council,  “privately produced monies” such as stablecoins are “not an effective medium of exchange because they are not always accepted at par and are subject to runs.” The authors then go on to ...

According to a paper published by Gary B. Gorton, a professor at Yale University, and Jeffery Zhang of the Federal Reserve System Council,  “privately produced monies” such as stablecoins are “not an effective medium of exchange because they are not always accepted at par and are subject to runs.” The authors then go on to propose solutions to address what they consider to be “systemic risks created by stablecoins.”The paper made its way through Twitter on Sunday.

The Federal Reserve’s ongoing research into central bank digital currencies, or CBDCs, has broadened to include stablecoins and whether they can be effectively regulated. Beginning July 19, Yellen will convene the President’s Working Group on Financial Markets to Discuss Stablecoins.

By Amy Liu