Vice President of the US Federal Reserve: stablecoins may be a “significant” risk – DiarioBitcoin

Vice President of the US Federal Reserve: stablecoins may be a "significant" risk - DiarioBitcoin

Vice President of the US Federal Reserve: stablecoins may be a "significant" risk - DiarioBitcoin For DailyBitcoin Editor

Lael Brainard, Vice President of the US Federal Reserve, believes that stablecoins could be a “significant” risk to the payment system.

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  • The vice president of the FED criticizes stablecoins.
  • Brainard thinks that crypto can fragment the US payment system.
  • Payment with cash in the US has been reduced from 31% to 20%.

The vice president of Federal Reserve (FED) of the United States, Lael Brainard, testifies about the stablecoins and central bank digital currencies (CBDCs) before the US House Committee on Financial Services. During his speech, he expresses his views on physical currency, CBDCs, and stablecoins.

According to Brainard, the advantage of physical currency is that “provides the public with access to safe, exchangeable central bank money without worrying about liquidity or credit risk.”

However, it also highlighted that the proportion of cash payments made in the US. it has dropped from 31% to 20% in just five years, with an even lower percentage for the under-45 demographic.

Brainard believes this warrants consideration of how to preserve immediate public access to the central bank’s safe money, suggesting the Fed’s creation of the digital analog of physical currency as an idea.

In his words:

“Confidence in commercial bank money is based on deposit insurance, banks’ access to central bank liquidity, and banking regulation and supervision.”

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against the stablecoins

Likewise, Brainard criticized the idea of ​​stablecoins (stablecoins) for not sharing “these same protections” (of central bank money), what “could reintroduce significant counterparty risk in the payment system.”

reasoned that “These new forms of money may lose their promised value relative to fiat currency, hurting consumers or, on a large scale, creating broader risks to financial stability.”

against private money

In addition, he believes that the extensive use of “private money, in the form of stablecoins or cryptocurrencies” could lead to “fragmentation of the US payment system in the so-called walled gardens”.

On this he detailed:

“These new forms of money may lose their promised value relative to fiat currency, hurting consumers or, on a large scale, creating broader risks to financial stability. We have seen before the risks posed by the widespread use of private money.”

And compared with other times:

“In the 19th century, active competition among private paper note issuers led to inefficiency, fraud, and instability in the U.S. payment system, ultimately necessitating a uniform form of government-backed money. National government. A predominance of private money of this type could introduce risks for consumer protection and financial stability due to its potential volatility and the risk of run-like behavioras demonstrated on a smaller scale in recent weeks.”

On land Y Tether

Of course, Brainard specifically referred to the crisis of UST from land and also about Tether, although he did not name them. He said this:

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“There has been explosive growth in an emerging digital financial system built around new digital assets and facilitated by crypto asset platforms and stablecoins as settlement assets. In recent weeks, two widely used stablecoins have come under considerable pressure. A widely used algorithmic stablecoin shrunk to a tiny fraction of its assumed value, and the stablecoin that is the most traded crypto asset by volume temporarily fell below its assumed one-for-one valuation with the dollar.”

In this regard, he noted:

“These events underscore the need for clear regulatory barriers to provide consumer and investor protection, protect financial stability, and ensure a level playing field for competition and innovation throughout the financial system. The recent turmoil in the crypto financial markets makes it clear that the actions we take now, whether on the regulatory framework or on a digital dollar, must be sound for the future evolution of the financial system.”

In favor of CBDCs

After saying this, the vice president of the FED declared herself in favor of the central bank digital currencies, CBDC. About them he said:

“In some future circumstances, CBDC could co-exist with and be complementary to stablecoins and commercial bank money by providing a secure central bank liability in the digital financial ecosystem, just as cash currently co-exists with commercial bank money. commercial banks”.

He added that it was important to weigh and mitigate potential risks related to CBDCs themselves.

“It is also important to consider the potential risks of a CBDC associated with the disintermediation of banks, given their fundamental role in the provision of credit, the management of monetary policy.”

He added: “In future states where other major foreign currencies are issued in the form of CBDCs, it is prudent to consider how the possible absence or presence of a US central bank digital dollar could affect the use of the dollar in global payments.”

Sources: Federal Reserve, FinboldFile, Archive

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