US Fed – Stablecoins Threaten Financial Stability
The US Fed has stated that stablecoins could parallel other modes of payment and enhance customer experience, but requires regular checks. In its November 2019 Financial Stability Report published on November 15, the Federal Reserve talks about stablecoins and their likely effect on the US and elsewhere.
Instead of brushing away stablecoin irrelevant, officials are exploring possible use cases for the time ahead but stress that stablecoin must conform to regulations.
“Innovations that foster faster, cheaper, and more inclusive payments could complement existing payment systems and improve consumer welfare if appropriately designed and regulated,” the report elaborates.
At the same time, the Fed warns:
“However, the possibility for a stablecoin payment network to quickly achieve global scale introduces important challenges and risks related to financial stability, monetary policy, safeguards against money laundering and terrorist financing, and consumer and investor protection.”
The central bank also surprised with an unusual compliment for Libra, Facebook’s planned stablecoin, terming it as a model, which has “the potential to rapidly achieve widespread adoption.”
The Fed also stated that “A global stablecoin network, if poorly designed and unregulated, could pose risks to financial stability.”
The document has been released at a time when the Fed is studying about cryptos seriously. It can be remembered that the central bank advertised earlier this month for a manager with expertise in blockchain technology and cryptos.
While China is preparing to launch its native crypto, the US President Donald Trump stated his intention to launch a stablecoin, which is not completely by reserves.
The US lawmakers have started to screen the prevailing stablecoin offerings, including the controversial and popular stablecoin Tether (USDT), which is currently facing a multi-billion lawsuit. In other news, the US Fed Chair Jerome Powell acknowledged that the $23 trillion US national debt cannot be sustained, but the aftermath of not clearing the debt is not critical.