Federal Reserve’s Powell said that stablecoins risk a “high-level focus” reiterating today in a webinar that the central bank will take a careful look at stablecoins and their effects. In today’s crypto news, we are reading more about it.
Federal Reserve’s Powell, said that “stablecoins are at a “high-level focus” for the central bank. Powell said that the FED is mainly concerned about the financial risks that stablecoins pose and Central Bank Digital currencies are also on the FED radar. Powell said in a webinar that providing “regulatory answers” for stablecoins is a “high-level focus” for the central bank. He continued:
“We’ve been very focused… on potential regulatory answers for global stablecoins, in particular. So that’s been a high-level focus, and that will continue to be a high-level focus because they could become systemically important overnight and we don’t begin to have, you know, our arms around the potential risks and how to manage those risks, and the public will expect we do and has every right to expect that… It’s a very high priority.”
Christine Lagarde from the European Central Bank shares a similar view and she also published an op-ed that warned that stablecoins if they get widely adopted could threaten financial stability and monetary sovereignty in the world. Other global financial bodies like G20 and G7 expressed similar concerns. Powell didn’t go into much detail about how the FED plans to approach stablecoins in the future but his tone suggested that these private digital currencies are on the bank’s radar.
Regarding CBDCs, Brunnermeier asked if Powell was interested in waiting to see how they performed in the smaller countries before experimenting with a digital version of the US dollar. Powell explained that there’s no reason that the US has to be first in everything:
“Since we are the world’s reserve currency, we actually think we need to get this right, and we don’t feel an urge or need to be first. We effectively already have a first mover advantage, because we’re the reserve currency.”
China is now rushing to build its own CBDC while Japan, France, Thailand, and South Korea are all exploring their options.
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