Economics Advisory
Ousmène Jacques Mandeng
Strategic consultancy at the intersection of fintech, public policy and monetary economics
Central bank digital currencies, tokenized deposits, tokenized money market fund shares, tokenized e-money, cryptocurrencies
Unique track record with work on key digital money projects
Focus on foreign exchange and cross-border payments
Projects
Year in a word: Stablecoins—Yes, but they are money
Review of Financial Times opinion pieces on or with reference to stablecoins (part 4 of 4).
A piece of 27 December “Year in a word: Stablecoins” argues that stablecoins remain “one step removed from money” and that “the challenge for other countries is to justify why private money should exist alongside their own currencies.”
The piece outlines that “[p]egging a crypto token’s value to a real-world currency [..]makes it look like money [but its relationship to money remains one step removed].” I have argued before that stablecoins are money like other pre-paid instruments including e-money and travellers cheques and economically similar to bank deposits.[...]
Macron calls for euro stablecoins? Yes, but not enough for a bigger international role of the euro
Review of Financial Times opinion pieces on or with reference to stablecoins (part 3 of 4).
French President Emmanuel Macron in an opinion piece of 16 December urged the E.U. to “reinforce the international role of the euro through the development of euro stablecoins and the introduction of a digital euro”.
While I agree in principle that euro stablecoins and the digital euro should be part of the arsenal of monies of a modern E.U. payment system, they are on their own unlikely to attain the stated objective of a stronger international role of the euro. Currency attractiveness is set by interbank or wholesale, not retail payments.[...]
Stablecoin supercycle is coming? May look more like a minicycle
Review of Financial Times opinion pieces on or with reference to stablecoins (part 2 of 4).
A piece of 15 December “Why the ‘stablecoin supercycle’ could rewire banking” asserts that “one of the newest trends in payments technology—stablecoins—are about the enter a ‘supercycle’ that will swamp the world with more than 100,000 such payment systems within five years. Reconciling those coins-essentially crypto that is pegged to a real-world currency—will require a whole new financial infrastructure.”
I would argue stablecoins are not a payments technology but payment instruments. They are not new but similar to other pre-paid instruments like e-money and travellers cheques. Stablecoins are also not cryptos but money (where issued under a licenced regime, assuming any meaningful stablecoin will eventually be). While there are thousands of monies today—each bank issuing its own money (bank deposits)—some considerable consolidation and or strong leading brands seem more likely among stablecoins. And the infrastructure, the blockchain, is there already.[...]
Why the world should worry about stablecoins? Yes, but for different reasons
The Financial Times had recently a number of critical opinion pieces on or with reference to stablecoins serving as a reminder that the debate about stablecoins continues to lack shared principles. This post is part 1 of 4 to reflect on the Financial Times pieces.
A piece of 9 December “Why the world should worry about stablecoins” outlines that the “purported stability of stablecoins is likely to prove a ‘con’ relative to that of a dollar in cash or a bank” and that “private monies have often failed in crises and that is very likely to be true of stablecoins, too.”
I would argue that the risk to stability holds for all par instruments, that is, a dollar at a bank will be as safe as the bank as recent bank failures have shown. The claim that “private monies have often failed in crises” is partly true but seems to disregard the fact that most monies are private, namely liabilities of the financial sector excluding the central bank.[...]
Recent commentary
Where is the Digital in International Monetary Fund?
The International Monetary Fund (IMF) is trailing the debate about digital monies. It is slow to incorporate key new monetary developments into its remit to improve cross-border payments and strengthen the international monetary system. The IMF has been a money innovator in the past, notably with the introduction of the Special Drawing Rights (SDR). But today, for an institution that has money in its name, it is conspicuously absent in its efforts to improve it. [...]
Stablecoins are not the future of international payments
Once the preserve of the crypto community, stablecoins in recent years have been touted as a means of disrupting the global payments infrastructure, not least within areas such as cross-border transactions and foreign exchange settlement. Yet while stablecoins exhibit properties that lend themselves to settlement, a better option for cross-border payments has emerged in the form of tokenised money market funds.
Do stablecoins increase the net demand for US Treasury securities?
Stablecoins are being advertised as increasing the demand for high-quality assets. Some even suggest they may solve governments' debt problems by producing an increased demand for Treasury securities. US Treasury Secretary Scott Bessent said: "A thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries, which back stablecoins. This newfound demand could lower government borrowing costs and help rein in the national debt."
This view rests on the strong assumption that stablecoins can increase the net demand for Treasury securities. While this is possible, it is not assured, and under some conditions net demand could be unchanged or even lower.
A central bank digital currency can shape the national payment system
Central banks are exploring the idea of issuing a digital banknote or retail central bank digital currency (CBDC). Today, they offer only physical banknotes to the general public.
With increasing digitalisation in payments and already dominant use of digital means, it seems obvious that central banks should follow suit. Yet, many remain hesitant amid the availability of a broad range of alternative, typically bank-based, digital payment tools. Andrew Bailey, Governor of the Bank of England recently questioned the need for a retail CBDC if banks can offer a good alternative. The question therefore is, is a retail CBDC needed? The answer depends on how central banks see their role. [...]
Stablecoins thrive on regulation but is that enough?
Stablecoins have brought national-currency denominated monies onto blockchain. Not only is this highly commendable, it also crucially exposes the slowness of traditional money issuers in adopting new technologies. Recent regulatory advances, however, now seem to bestow stablecoins with specific advantages that may drive money fragmentation and arbitrage, create new compliance risks and distort fair competition. [...]
On the foreign exchange dimension of cross-border payments
[...] the new U.S. administration has engineered de facto a system reset. Its policy stance seems geared towards undermining the very foundations of the unique international role of the dollar. It seems that the quest for an alternative model is now far more urgent as it has become apparent that relying on a single currency may be just too risky. As there is no other currency that can supplant the dollar, nor would it be desirable, the alternative will likely be a greater currency diversification.[...]
Currency Wars in the Digital Age: CBDCs, Stablecoins and Mr Trump
[...] During the IMF Spring Meetings in April, IMF Chief Economist Pierre-Olivier Gourinchas stressed that the “global economic system that has been operating for the last 80 years has been reset.” In this seminar, I will try to offer you a new perspective on the international monetary dimension of the system reset. There is a new type of currency war looming which is about shifting the relative attractiveness of currencies in international payments. I will provide a brief overview of what the system is about and then focus on how digital monies may change it and why. The innovation with digital monies is not how payments are being made but how they are being processed and how thereby they may change the incentives for holding currencies.[...]
If the US dollar's dominance fades, here's what might replace it
Predictions about the demise of the U.S. dollar as the main international currency seem to be gaining momentum amid the recent drastic and unpredictable economic policy measures of the U.S. administration on tariffs. Credible paths toward an orderly regime change remain rare. Projects like mBridge with the participation of the central banks of China, Hong Kong, Saudi Arabia, Thailand and the United Arab Emirates promote greater currency diversification in international payments. Recent events may have made such projects even more relevant. [...]
More commentary
Services
Strategic advice
Consultation on monetary innovation, central bank digital currencies (CBDC), private digital monies and other blockchain-based financial and payments applications with a focus on cross-border payments and securities settlement.
Speaking
Event and keynote addresses and panel discussions on digital monies and assets and international monetary affairs.
Publications
Two key publications by the Reinventing Bretton Woods Committeeon international monetary affairs are now available on Amazon:
About
Economics Advisory Ltd. is a London-based private limited company registered in England and Wales established in 2018 with a special focus on tokenised money and payments solutions led by Ousmène Jacques Mandeng.
Dr Ousmène Jacques Mandeng specialises in the economics of tokenised monies, their impact on financial markets and the digital transformation of finance. He is acting as Senior Advisor to Accenture on major tokenised money projects and in particular central bank digital currencies. Ousmène had worked more than 20 years in senior positions in financial markets and the International Monetary Fund. He comments regularly on the impact of digital money and the international monetary system. Ousmène is a Visiting Fellow of the London School of Economics and Political Science, Member of the Bretton Woods Committee, Fellow of Reinventing Bretton Woods Commitee, Member of Robert Triffin International. He is fluent in German, English, French and Spanish and holds a PhD from the LSE.
All views expressed in this blog are those of Economics Advisory and not necessarily those of its clients.