Stablecoin as a Financial Instrument and Stablecoin as a Payment Instrument: Implications for Regulation, Innovation, and Market Stability

This paper explores the dual roles of stablecoins—as payment instruments emphasizing fast, low-cost transactions, and as financial instruments valued for generating returns and enabling investment within DeFi. It highlights the policy implications of these distinctions, cautioning that ignoring this divide could result in regulations that either suppress innovation in payments or inadequately address systemic financial risks.