Core Insights - The viability of stablecoins is heavily dependent on their quality and liquidity, as they lack deposit insurance and access to central bank liquidity [3] - Issuers of stablecoins have strong incentives to maximize returns on reserve assets, which can lead to increased profits but also heightened risks during market stress [4][5] - Stablecoins must be redeemable at par under various conditions, including market stress, to maintain stability [5] Group 1 - The potential for stablecoins to create new financial products and services is significant, but they also pose substantial risks if regulatory frameworks are inadequate [7] - Stablecoins are expected to be particularly useful for cross-border payments, remittances, trade finance, and internal treasury functions of global companies [7] - The regulatory framework for stablecoins is largely left to state and federal regulators, who must consider multiple risks associated with private money [7] Group 2 - Historical examples, such as the Reserve Primary Fund in 2008, illustrate the risks of private money and the potential for loss of confidence among investors [6] - The need for caution in the development of stablecoins is emphasized due to the historical context of bank runs and market stress periods [7]