5.1.3. A Global Stablecoin Initiative
The stablecoin can also be set up as a global initiative. The difference compared to the domestic model is that
the RoW sector now plays a key role, with the relative importance of the domestic investment funds sector
depending on the weight of the domestic economy in the stablecoin vehicle’s global reserve fund. Some
observers have suggested that a global stablecoin whose reserve fund is denominated in a (mix of) foreign
currencies could be considered a currency board type arrangement (see Anderson and Papadia, 2020). For the
analysis below, adopting this analogy would make no difference in theory but
– following the discussion in
Section 3 – since currency boards are not a concept that is included in either the national accounts or the
regulatory classifications, we consider the initiative of a global private digital currency/stablecoin a non-MFI
deposit scheme.
Figure 11 illustrates the case, with Panel A again showing the status quo network of deposits. Likewise, Panel B
shows the network of deposits after 20% MFI deposit withdrawals by the HH and NFC sectors. In Panel C, the
funds are transferred to the RoW sector where the stablecoin issuing vehicle now resides. Panel D shows the
final step under stage 1, where the global stablecoin vehicle moves a share of γ of its globally acquired deposits
from the RoW (its home jurisdiction) back to the domestic financial system (the host jurisdiction from the global
stablecoin’s perspective), where γ denotes the weight of the domestic currency (foreign currency from the global
stablecoin’s perspective) in the stablecoin’s global reserve fund. In the simulations, it is assumed that this weight
equals 30.93%, which is the current weight of the EUR in the IMF’s SDR basket. In our network of financial
accounts,
The rebalancing process must now take into account that the funds withdrawn from the commercial banks’
deposit accounts are split between two sectors. The share of γ will go to the global stablecoin’s subsidiary in the
home country (host country from the global stablecoin’s perspective; placed in the INV sector), whereas the
share of 1-γ will permanently move to the RoW. The familiar options, A) to D), for rebalancing are now somewhat
changed. Figure 12 shows option A), where the domestic INV sector first redeposits its share of γ with the
domestic commercial banks (the MFI sector), leaving the MFIs with a remaining funding gap of 1-γ (Panel A). The
RoW sector goes through its own internal rebalancing process,
but at the end of the day, it will hold 1-γ worth of
surplus EUR denominated funds, which it will deposit in the home country CB (the Eurosystem). In the case of
the Eurosystem, these funds would enter the balance sheet item “EUR denominated deposits by non-euro area
residents” (Panel B). The domestic commercial banks then borrow these funds from the central bank in its repo
operations to cover their remaining funding gap (Panel C).
Cases B-D are similar to those described in Sections 5.1.1 and 5.1.2, with the difference being that if, for example,
the MFI sector issues new bonds, these bonds cannot be purchased by the RoW sector, since the latter will not
acquire euro area assets in excess of its share of 1-γ. However, given that in a closed financial system the RoW
sector ultimately redeposits its share of 1-γ with the domestic central bank, in cases B to D the securities
purchases are made jointly by the CB and the INV sectors, with the relative shares determined by the size of γ
