The Greater Sustainability of Stablecoins Relative to Other Cryptocurrencies

Cryptocurrencies are decentralized digital financial services that do not physically exist in the world of tangible products and goods, and therefore purportedly offer some positive environmental sustainability features. However, since they are based on blockchain technology, which requires a relatively large input of energy, their climatic impact is not benign. Furthermore, they are very volatile and characterized by low levels of transparency and control, thus creating some negative economic and social sustainability effects. Stablecoins, which are a pegged type of cryptocurrency, exhibit much less volatility and have higher levels of management and interoperability. This raises the following question: are stablecoins more sustainable compared to other cryptocurrencies? To explore this, a sustainability assessment was conducted, comparing cryptocurrencies and stablecoins across environmental, social, and economic dimensions while identifying the key characteristics of sustainability. It was found that stablecoins can mitigate the economic and social risks associated with cryptocurrencies and thus increase their overall sustainability. Moreover, since stablecoins are managed and governed to a greater extent, a key consideration in their development is the selection and implementation of more appropriate mechanisms that can reduce energy use and enhance sustainability. Finally, stablecoins offer more effective—and not just more efficient—solutions, based on value co-creation between several providers and a customer.