In the context of global financial volatility, the stability of the USD has always been a focal point of interest for experts and investors. The latest research report from Minsheng Securities assesses that, at least in the short term, stablecoins cannot play a role in replacing or reinforcing the credibility of the USD. This is considered based on the ability to control supply and the global recognition of stablecoins compared to traditional reserve assets like gold. The following article will analyze in detail the current state of stablecoins in supporting the USD, thereby helping readers better understand the challenges and potentials of this cryptocurrency in the global financial market.

Current state of the USD credit and the role of stablecoins

The USD is maintaining its dominant position in the global foreign exchange reserve system, with over 6.7 trillion USD in official reserves as of Q2 2024. However, the stability and credibility of the USD do not only depend on this reserve amount but also on partners and related credit assurance mechanisms. Minsheng Securities emphasizes that the issue with the USD does not only lie in the preferences of the United States or the public but in its dependence on partner parties, which may put the USD under pressure in the near future.

Stablecoins, with their technological appeal and potential for rapid growth in the capital market, have recorded a market capitalization exceeding 240 billion USD. However, this figure is still quite modest compared to the total global USD foreign exchange reserves. This indicates that stablecoins, despite their strong growth, cannot immediately replace the traditional role of the USD or create long-term stability for this currency.

Risks regarding the supply control of stablecoins

One of the major limitations of stablecoins is the difficulty in controlling the money supply due to their decentralized nature and the diversity of issuance mechanisms. Unlike gold or other reserve assets that have clear limiting mechanisms, stablecoins can be issued beyond limits without objective constraints, leading to the risk of value instability.

Minsheng Securities points out that the overheating growth of stablecoins, if not controlled, will pose risks to reliability and safety for investors, diminishing the role of the USD in the global financial system. Transparency, oversight, and regulatory frameworks are critical factors that need to be strengthened for stablecoins to become a reliable financial tool.

Comparison of the role of stablecoins and traditional reserve assets

Gold has long been regarded as a foundational reserve asset with stable value and global recognition. Unlike stablecoins, gold is not easily manipulated or issued without control. This helps gold maintain its role as a support for reserve currencies, including the USD.

Stablecoins, while having advantages in liquidity and fast transactions, lack the widespread recognition of traditional reserve assets. While gold is trusted by central banks and financial institutions, stablecoins have not yet been fully regarded as a credible asset to replace or support the USD in the long term.

Conclusion on the stability potential of stablecoins concerning the USD

Although the stablecoin market has developed remarkably in recent years, in terms of scale and recognition, they are still not strong enough to stabilize or replace the USD in its role as a global reserve. According to experts from Minsheng Securities, time and many improvements in both technology and policy are needed for stablecoins to gradually build trust in the market.

At this point in time, stablecoins are still only supplementary assets and not yet a true alternative to USD foreign exchange reserves. This clearly reflects the complexity in establishing a supply control mechanism and global recognition, as well as the challenges in maintaining financial stability when applying cryptocurrency technology to the traditional financial system.

Source: https://tintucbitcoin.com/stablecoin-kho-cuu-usd-ngan-han/

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