Are Stablecoins the Currency Hedging Emerging Markets Need?


Fool.com contributors Chris MacDonald and Jon Quast discuss whether stablecoins such as Attached (CRYPTO:USDT) could be the solution to the woes of many emerging markets. This conversation took place on “The Crypto Show” on Backstage pass to January 12.

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Jon Quast: One thing that is not meant to fluctuate in great value day to day is stablecoins. We have some interesting news from Turkey in recent days. In Turkey, inflation out of control, loss of value on the Turkish lira, 40% of its value has been lost against the dollar, and people are turning to stablecoins.

Chris McDonald: Yes, it’s interesting to see how monetary policy can really affect the economy in general, and for Turkey, interest rate cuts as inflation raged led to this currency decline.

For crypto bulls, one of the main theories for owning something like Bitcoin is that it will retain its value against the dollar. If you’re in parts of the world where there’s this currency depreciation, there’s not just an inflation hedge, but potentially a currency hedge as well to own something that stays relatively stable.

Now, we just talked about the volatility of crypto in general, and the question is how much of a hedge really is a cryptocurrency if it fluctuates so much. But there’s this idea that something like bitcoin that’s a bit more stable or stablecoins is the way to go.

I know in Turkey there was a report I was reading today that Tether in particular is one of the stablecoins that has been focused on, I think we have it in the next slide here . The majority of Tether deposits now come from Turkey, which is pretty amazing. But I think it speaks to the demand for something stable, and whether you invest in dollars or stablecoins backed by US dollars. It’s something interesting.

But Tether, there’s a bit of a deeper story when it comes to what’s supporting Tether. There has been a lot of talk about what type of trading paper, or it’s not just US dollars that backs some of these stablecoins. You might have to dive into the weeds a bit with these and that’s something I want to do a bit more.

But in general, yeah, it’s definitely an interesting trend to watch. I know we are going to reach a little more, not only Turkey but other countries, Argentina, some South American countries as well.

Chris MacDonald has no position in the stocks mentioned. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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