International standards explicitly call on payment systems to settle in central bank money when possible and where that’s not possible, to settle in commercial bank money and to strictly limit any credit and liquidity risk of the instrument being transferred and settled. However stablecoin arrangements propose to transfer new instruments that they will create themselves – and to settle most of their transactions across their own books. With the right regulation, stablecoins may be safe for use in systemic payments chains. But the protections these stablecoins would offer are currently big question marks. Some major stablecoin proposals offer no legal claim for holders. None. This is significantly different from how we currently pay: When my parents pay for their groceries using their debit card, the shop ultimately receives an electronic deposit in the shop’s bank account - a promise from the shop’s bank to redeem the amount deposited in local currency on demand. When – pre-COVID – my parents paid in cash, the shop got banknotes with a central bank promise to “pay the bearer.” Were they to pay in the future with some proposed stablecoins, the shop would just get a bunch of stablecoins. If the shop can’t sell the stablecoin to get local currency or other goods in an amount equivalent to the price of the grocery order, tough luck. Additionally many stablecoins propose backing in instruments that may have market and liquidity risk. While these risks might be acceptable for speculative investment purposes, payments are different.
Events that we once thought to be implausible or highly unlikely, have become the “new normal”. 1/5  BIS central bankers' speeches  In many parts of the world, health care costs continue to rise, and many face uncertain futures as public sector safety nets and government finances come under increasing strain. Against this backdrop, financial inclusion for the underserved segments remains an elusive goal. For the insurance industry, this raises important issues. Two issues come to my mind. First is on the industry’s role in addressing a few of the challenges facing our economies and society. And second, the manner in which regulation and supervision can adapt to support broader economic and social development. In addressing these issues, I shall attempt to advocate the idea that a rethinking in approach is an imperative. New paradigms are needed to anchor business and public policy to the realities of the future. I will touch on three of them: competitive, stability and ethical paradigms. A new competitive paradigm In an increasingly interconnected world, traditional models of competition deserve a re-think. Network effects will become more important, both in increasing the value of insurance products and services, and to better manage risks. Rather than see the competitive landscape through a zero-sum lens, co-operative competition or “co-opetition” can result in synergistic benefits. The example of Hewlett- Packard (HP) clearly illustrates this idea.