If stablecoins are money, they should be backed by reserves

The growth of stablecoins could reduce the supply of safe collateral available to markets

Stablecoins are sometimes dismissed as the poor relations of the cryptocurrency family. While free-floating cryptocurrencies such as bitcoin and ethereum have soared in value, stablecoins are more like government money market funds that are anchored to a par value.

This is by design. Stablecoins are designed to be a medium of exchange, rather than a speculative asset, and are typically pegged to an established currency. But, despite their promise of stability, they may pose a bigger challenge