Stablecoins: Roman Coins or Spanish Doubloons for the Modern Era

It is easy to see digital assets as something completely new. However, they represent a return to a longer-term historical trend of money being far more international than it is today. Stablecoins and digital assets are a means of unshackling money from inherently national payment systems and placing it on the open internet.

To illustrate the point, we can look back to the 1950s when a hoard of Roman denarius coins, buried by a soldier in 43 A.D., was discovered in Kent, England. What was surprising was that it contained coins from the Roman Republic. This meant that the Roman soldier was being paid in silver coins that were potentially up to 250 years old. The modern equivalent is to pay a U.S. Marine today with Spanish doubloons.

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Modern money has a much shorter lifespan and is far less international compared with Roman times. This longevity and mobility meant that the world was divided into much larger currency blocs. In 1800, the Spanish doubloon, also known as the silver dollar, was used across Latin America, the Caribbean, China and large parts of Southeast Asia. The Indian rupee dominated large parts of Arabia and Africa, while the Ottoman lira was used across the Balkans and the Middle East.

By 1900, colonialism had seen the adoption of currencies, or at least local derivations, of the British pound, French franc and others. Latin American independence movements had led to the creation of new nation-states and, with them, their own currencies, thus breaking down these large currency blocs.

After World War II, there was another surge in the number of independent nations with their own currencies such as the Indonesian rupiah and the Pakistani rupee. By 2000, the collapse of the Soviet Union and Yugoslavia led to the addition of currencies such as the Serbian dinar and the Armenian dram, resulting in a global total of over 150 currencies. Since then, the trend has started to go into reverse with the euro as well as the dollarisation of countries such as Ecuador.

The arrival of digital assets, which allows money to be placed on the open internet, means that the borders that once separated currency areas are breaking down. Stablecoins are one of the first movers in this evolution. They are, unlike fiat currency or many central bank digital currencies, borderless by design. They can be sent as easily and cheaply as sending a text message or an email and can be held by a recipient in a digital wallet. They are currently issued by private companies, but a limited group of nations may have an opportunity to support the international or regional adoption of their currencies by making them available as stablecoins.

Stablecoins may lead to a return of the historical norm of the world existing in much larger currency blocs, which in turn would make cross-border commerce much cheaper and easier.