a16z experts analyze the three core challenges and opportunities in the development of stablecoins

Gate News bot message, a16z’s Sam Broner recently published an article that delves into the three core challenges and development opportunities currently faced by the stablecoin industry.

The first challenge lies in achieving deep integration of stablecoins with the traditional financial system to achieve “monetary unification.” The second topic focuses on the global application of USD stablecoins and their ripple effects on local monetary policies in various countries. The third emphasis revolves around diversified collateral such as government bonds, deposits, and real-world assets (RWA), exploring the design of stablecoin models with higher capital efficiency.

The article points out that the rise of stablecoins offers new possibilities for the financial system, but also raises the challenging balance between credit creation and system stability. Future solutions will need to find the best combination between economic efficiency and traditional financial functions.

To ensure that stablecoins retain some advantages of the fractional reserve banking system while promoting economic dynamism, design improvements can be made in the following three areas:

Tokenized Deposit Model: By using Tokenized Deposit to retain deposits within a fractional reserve system.

Diversification of collateral: Expand collateral from short-term Treasury bills (T-bills) to other high-quality, liquid assets.

Embed automatic liquidity mechanisms: Reintroduce idle reserves into the credit market through on-chain repo agreements, tri-party facilities, collateralized debt position (CDP) pools, and other means.

In addition to deposit-supported stablecoins, other solutions can also enhance capital efficiency, reduce friction in the government bond market, and increase currency liquidity, such as helping banks embrace stablecoins, assisting individuals and enterprises in adopting DeFi, expanding the types of collateral and tokenizing it, bringing collateral on-chain to improve liquidity, and adopting the collateralized debt position (CDP) model, etc.