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22 N.Y.U. J. Legis. & Pub. Pol'y 1 (2019-2020)

handle is hein.journals/nyulpp22 and id is 1 raw text is: STABLECOINS IN CRYPTOECONOMICS: FROM INITIAL COIN OFFERINGS TO CENTRAL BANK DIGITAL CURRENCIES Marco Dell'Erba* Cryptocurrencies have suffered from tremendous volatility. As a result, cryptocurrencies cannot adequately serve the needs generally associated with currencies: to serve as a store of value as well as a medium of ex- change and a unit of account. For this reason, developers and entrepre- neurs have started to design an alternative form of currency called stablecoins. A stablecoin is a stable cryptocurrency, pegged to fiat cur- rencies such as the U.S. dollar and Euro. Stablecoins are stabilized (in prin- ciple) by either being backed by collateral (such as fiat currency, precious metal, or a basket of cryptocurrencies) or with algorithmic seigniorage mechanisms. This Article analyzes stablecoins' main characteristics, identifies the different types of stablecoins, and considers stablecoins' role in cryptoeco- nomics and their potential to revolutionize distributed ledger technology. Furthermore, this Article builds on the problems affecting stablecoins, fo- cusing in particular on: the apparent contradiction in implementing a fully decentralized system that is based on a central validator; the endemic opaqueness of auditing operations; conflicts of interest emerging from st- ablecoins' relationship with cryptoexchanges; and their role in the recent Bitcoin bubble. Finally, this Article highlights the regulatory uncertainty that exists in securities and commodities law, which may cause stablecoins to be characterized in the same way as initial coin offerings (ICOs) and motivate governments and central bankers to design and effectively imple- ment central bank digital currencies (CBDCs). More broadly, this Article aims to highlight the factual interconnections linking ICOs, cryptocurren- cies, stablecoins and CBDCs. INTRODUCTION .............................................. .... 2 R I. WHAT IS A STABLECOIN? ............................ .. 7 R * Assistant Professor of Law, University of Zurich, Fellow, NYU School of Law's Institute for Corporate Governance and Finance, Research Associate, Financial Regulation Laboratory of Excellence, University of Paris I Pantheon-Sorbonne. I am grateful to Professors Jennifer Arlen, Geoffrey P. Miller, Edward B. Rock, Drew Hinkes, Alan N. Rechtschaffen and Alain Pietrancosta. I want to thank Robert Dilworth (Bank of America Merrill Lynch), Stratos Pahis (NYU), Paul Linden-Retek (Yale, NYU) and Thalia Lamping (Clifford Chance) for their suggestions. I truly ap- preciate the interactions and the comments I received from the editors of this journal, in particular Stephen Nemec. Finally, I am deeply grateful to the Hauser Program (NYU School of Law) and its promoters for their support and the interest in my work over the past two years. 1 Imaged with Permission of N.Y.U. Journal of Legislation and Public Policy

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