Page 81 - Azerbaijan State University of Economics

Kh.R.Taghiyev , U.F.Yusifov, M.R.Taghiyev: Stablecoıns and Theır Specıfıc Features

These innovations have affected not only financial services such as payments, credit,

investment and insurance, but also money itself, which is the basis of the financial
system (BIS, 2018; 2020). The Covid-19 crisis has accelerated the transition to
digital payments. It has raised public concern about the transmission of the virus in
cash and led to an increase in the use of digital payments. For central banks and
regulators, these challenges are particularly important in achieving their financial
and monetary stability. Today, authorities around the world are struggling with the
rise of digital currencies and decentralized finance based on emerging technologies,
especially various combinations of distributed ledger technology (DLT) and
blockchain, and advances in traditional centralized financial support systems. Many
claim that there has been a technological revolution in money and payment systems
(Arner et al., 2020).

In current policy discussions, stablecoin can be defined as a cryptocurrency that
aims to maintain a fixed value relative to a particular asset or asset pool or basket
(FSB, 2020). Stablecoins based in the same space as bitcoin and other
cryptocurrencies because they are electronic, can be exchanged between peers, and
are not issued by central banks. Stable coins are token-based; their validity is
verified based on the token itself, not on the identity of the other party, as in
account-based payments (Kahn, 2016).

The idea of stablecoins is not entirely new. Prepaid cards and money market funds
also offer some similarities, such as various forms of mobile money, with electronic
or “electronic money” discussions dating back to the 1990s. However, DLT has
enabled the creation of new digital money forms and payment systems that can serve
new purposes and expand some well-known economic and regulatory issues related
to past innovations into the digital world. Existing stablecoins such as Tether, USD
Coin and Maker’s Dai aim to serve as a means of settlement for automated financial
products. They also offer "smart" contracts, ie self-executing code and
“programmable money” opportunities.

The main focus of the article will be on the objectives of creating stablecoins as a
virtual currency, its differences with traditional currencies, the characteristics that
combine stablecoins with central bank virtual currency, the possibilities of its use as
a means of payment and its regulation by government in international practice.

WHAT ARE STABLECOİNS?
There are different types of virtual currencies in the world today. One of them is a
stablecoin. Before looking at the nature of stablecoins, let's look at the essence of
virtual currency in general. Virtual currencies are available in two types of schemes:
centralized and decentralized.

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