How do national stablecoins help protect financial stability?

[AIcash]

Governments worry that widespread use of foreign or corporate stablecoins could drain deposits from local banks and weaken the traditional banking system. A nationally regulated stablecoin can be designed to integrate with existing banks rather than compete with them.

By controlling issuance, reserve management, and redemption rules, authorities can reduce risks like bank runs, sudden capital flight, or loss of confidence during economic stress. This makes stablecoins a tool for stability instead of a threat to it.