Stablecoins explained

The rapid proliferation of cryptocurrencies has been matched by massive swings in their value relative to traditional currencies. This means that cryptocurrency holders can never be certain of their purchasing power. Enter stablecoins, a form of cryptocurrency that is backed by traditional currencies (such as the Swiss franc or US dollar), or other assets such as gold or oil.

Cryptocurrencies are run on Distributed Ledger Technology systems like blockchain. This gives people direct control over their money and the means to transact it more efficiently than the standard financial infrastructure.

This could be particularly useful for people in countries with a weak banking infrastructure. Cryptocurrencies don’t need banks, just an internet access.

The arrival of cryptocurrencies has spooked many governments and central banks who fear losing control over their national currencies if people switch to the new form of private digital cash.

Many central banks around the world are therefore researching their own response to cryptocurrencies – Central Bank Digital Currencies (CBDCs), which they hope will appeal to citizens more than upstart newcomers like bitcoin.