Yesterday the U.S. Federal Reserve published a paper exploring the impact on banks of various stablecoin designs. Some are concerned that stablecoins might reduce the ability of banks to make loans with a negative knock-on effect on the economy, so this was the area studied.
The research focused on the types of assets used to back the stablecoins: central bank deposits (narrow banking), commercial bank deposits, and securities. Other parties also consider security-backed stablecoins as narrow banking.
Summarising the impact on commercial lending, the conclusion was:
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