No regulatory backing but stablecoin use rising in India

Money is fundamental to the functioning of an economy and trust is fundamental for it to work.

- ROHAN LAKHAIYAR & DEEPANKAR SANWALKA

National economies are powered by central bank-issued banknotes and commercial banks’ deposits in local currencies. Their failure has painful consequences. In 2018, Venezuela suffered hyperinflation of 100,000 per cent, rendering the Bolivar nearly worthless. Venezuelans turned to the United States (US) dollar and cryptocurrencies for payments. Historically, people have used alternative currencies when the sovereign currency has lost its value and trust. However, change is in the air.

The anonymous founders of Bitcoin, the world’s largest cryptocurrency by market capitalisation, intended to substitute the centralised model of money with decentralised cryptography. However, the volatility of crypto assets makes them ineffective as a medium of exchange and a stable store of value — roles that money is expected to play. Consequently, crypto assets have transitioned into a separate investment class.