New Delhi, Dec. 18 -- The Reserve Bank of India's deputy governor T. Rabi Sankar recently responded to a question at a Mint conference on whether stablecoins have a role in the financial system by saying they serve no purpose that fiat money cannot serve. We respectfully disagree. Stablecoins do serve a role within today's fiat-money system-not by replacing it, but by placing a wrapper of imagined stability over it.

That this wrapper is thin need not concern us for the moment. Demand for 'stability' allows us to picture an alternative world of finance. Fiat currencies, backed by nothing more than the word ('IOU') of a nation-state, have always embodied a power asymmetry. The history of nation-states and empires is littered with examples ...