Essentially, these are crypto-tokens that claim to be backed by fiat currency. Prominent examples that already exist are USD Coin and PAX Dollar. While payers and payees trust fiat money because central banks take responsibility for its stability, stablecoins merely borrow trust from the currency they are pegged to.
Yet, the substance of this pledge has so far neither been regulated nor put to the test. 2 Different regulatory approaches Nevertheless, tremendous progress has been made in payments overall. The market has been moving away from a fairly simple structure. There used to be a limited number of regulated participants domiciled within a certain area.