Stablecoins vs. Banks – What Makes Good Money?

The debate over the future of money increasingly revolves around the comparison between traditional banks and modern stablecoins. For centuries, banks have been the backbone of the financial system, supported by state guarantees and central banks. Stablecoins, by contrast, rely on blockchain technology and are often pegged to established currencies such as the US dollar. This raises the central question: What qualities must money have today to be considered stable, trustworthy, and practical?

While central banks highlight the risks of stablecoins without state backing, advocates point to their advantages: fast settlement, low fees, and global availability. Banks counter with their strengths—regulation, consumer protection, and institutional stability. The discussion shows that it’s not just about technological innovation, but about core principles such as trust, security, and efficiency.

Uniformity: Money is never truly equal

One of money’s traditional ideals is uniformity: every unit should carry the same value regardless of its form. In reality, neither banks nor stablecoins can guarantee this fully.

Bank deposits, USDC, or Tether all promise redeemability at face value in U.S. dollars. Yet in times of stress, deviations occur. Bank customers in crises sometimes had to sell deposits at a discount, while stablecoins dipped below $1 whenever doubts about reserves emerged.

Practical examples:

• Banks: Discounts on deposits during banking crises

• USDC: Briefly traded below $1 during market uncertainty

• Tether: Volatility in secondary markets during heavy demand

The key difference: stablecoins are tradable around the clock—even on weekends and holidays when banks are closed.

This highlights that the problem of uniformity is not unique to stablecoins—the concept itself has practical limitations.

Elasticity: Faster doesn’t mean weaker

Elasticity refers to the ability of a monetary system to adapt to the demands of the real economy. Banks achieve this partly through settlement delays. Transfers can take hours or days, and during that time the same funds may appear on both sides of the ledger—a temporary “double money” effect that provides short-term liquidity.

Stablecoins, however, operate differently. Transactions are settled within seconds and are final. There is no “money in transit.” While this prevents the traditional form of elasticity, it introduces new technical possibilities. Flash loans are a prime example—digital assets are borrowed without collateral and repaid within the same transaction, generating liquidity without leaving outstanding claims.

In other words, digital currencies don’t need to mirror banks’ processes to remain adaptive—they can embed flexibility directly into their code while ensuring speed and finality.

Integrity: Safer through regulation or transparency?

Integrity concerns how effectively financial systems prevent illicit activity. Banks boast decades of experience in anti-money laundering (AML), yet success rates remain extremely low—less than one percent of illegal flows are intercepted.

Stablecoins and crypto markets appear more vulnerable at first glance, given their lack of centralized oversight. But their transparency also offers new tools: blockchain ledgers are public, making it possible to trace and sometimes even recover stolen funds.

Thus, security isn’t solely about regulation—it also depends on technological traceability.

Banks and Stablecoins – Rivals or Complements?

Stablecoins don’t need to replace banks to be relevant. Their value lies in providing stability, transferability, and trust. For banks, meanwhile, regulation and deposit insurance can no longer be seen as exclusive advantages.

In practice, innovation is increasingly driven outside the banking sector. Decentralized finance projects such as Curve Finance, a trading platform for stablecoins, illustrate how alternative models can capture significant market share.

Ultimately, the real question is not whether stablecoins will replace banks. Instead, it’s how both systems will evolve to meet the demands of a digital, global, and always-on economy.