Pablo Hernández de Cos argues that tokenized bank deposits are preferable for this purpose. They combine the advantages of tokenization with the foundations of the monetary system. In addition, there are significant differences in stablecoin regulation across major jurisdictions such as the United States, the EU, the UK, and others.
At the same time, dollar-denominated tokens could undermine monetary sovereignty and weaken countries’ domestic monetary policy. Hernández de Cos argues that stablecoins could also reduce the cost of government borrowing. However, a shift of customer funds from deposits into stablecoins could increase banks’ funding costs. This would raise lending rates for businesses.