Stablecoins and the forgotten merits of fractional reserves
|Modernity sometimes conceals, under new guises, a return to old precepts: a currency backed 100% by the safest assets, bank deposits guaranteed by tangible reserves, the search for unfailing financial stability. Stablecoins (digital tokens backed by highly safe and liquid assets) are part of this logic. However, in our modern economies, banks only keep a small fraction of deposits in reserve with the Central Bank: this is the principle of "fractional reserves" which gives them the ability to create money (the remaining deposits can be allocated to credit). Beyond the intellectual interest that they attract, stablecoins raise a broader question: if their use were to become widespread, would they not risk making it more difficult to finance the economy?
An attractive proposition that is still only marginally used
Each token issued is backed by the same value of "reserve assets" in the form of bank deposits or short-term sovereign securities denominated in the currency to which the stablecoin is pegged (the dollar in 99% of cases). This fully backed architecture is appealingly simple and reassuring as it promises that each unit can be exchanged at any time for secure assets in official currency. In practice, stablecoins are rarely exchanged at exactly 1:1.[1]
These digital tokens, which circulate on public or private blockchains, offer instant borderless transferability, which explains their role in the crypto ecosystem. They are primarily a more stable alternative to first-generation crypto-assets (e.g. bitcoin) and a cross-platform settlement instrument facilitating the circulation of liquidity. Beyond cross-border payments or fund transfers, their adoption remains marginal[2]. Their potential is nonetheless real: by reducing friction and costs, they are already streamlining some international payments and could quickly supplant, or at least compete with, traditional banking methods, and even the more recent alternatives offered by various fintech service providers.
Stablecoins are experiencing contrasting dynamics on either side of the Atlantic. In the United States, their outstanding amount has grown exponentially (from USD 1 billion at the beginning of 2019 to just over USD 300 billion today[3] ), driven by global demand for dollar-backed instruments and the rise of an initially loosely regulated crypto ecosystem. The Genius[4] Act, adopted in July 2025, acted as a catalyst by establishing stablecoins as regulated payment instruments (and therefore, for example, acceptable as collateral for loans). By contrast, in Europe, the market for euro-denominated stablecoins is still in its infancy (with an outstanding amount of less than EUR 350 million[5]), and most of those in circulation are denominated in US dollars. The entry into force of the provisions of the European MiCA Regulation[6] relating to stablecoins on 30 December 2024 led to the delisting of more than 140 billion of non-compliant stablecoins, mainly Tether's USDT, causing significant market disruption.
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