Friday, November 26

We need to regulate the market before it moves to another jurisdiction, says Fed

Christopher Waller, a member of the US Federal Reserve System (Fed), spoke about the importance of regulating the stablecois sector in the country last Wednesday (17th) during conference about financial stability in Cleveland.

According to him, it is necessary to take action to protect consumers. If this is not done, these currencies can migrate to other jurisdictions, leaving the US with no control over them.

This appears to be a smart move by the US as citizens of other countries can buy their currency more easily, while the country maintains control over the issuance of these stablecoins. It seems that now the ones who need to make a decision are the other governments, which have weaker currencies.

Stablecoins are the focus of government

Waller is skeptical about the creation of a CBDC by the government, according to him that the innovation of the private sector can meet the needs of consumers, especially when there is competition. However, he reminds that it is necessary to keep these companies within the US jurisdiction, otherwise they will not have control in this market.

“This growth in the use of stablecoins and their potential to serve as a retail payment instrument has sparked regulatory attention, including a new report from the PWG. This report encourages Congress to limit the issuance of “payment stablecoins” to banks and other insured institutions.”, stated Christopher Waller

As well as Bitcoin, and other currencies not pegged to other assets, a big difference of stablecoins is the use of the blockchain. Serving as a universal means of payment and used in various sectors, both physical and digital.

For us Brazilians, for example, it is easier to have exposure to the dollar through a stablecoin than through traditional means, such as a bank account. The same goes for citizens of other countries, also in terms of international remittances.

This is great for the US, as more people use — or at least buy — your currency. However, as Waller reasoned, issuers need to be trustworthy, otherwise consumers can be harmed.

Cryptocurrencies don’t seem to be a problem.

About cryptocurrencies itself, the government doesn’t seem to be too concerned, after all they are as transparent as they can be. Furthermore, there is no institution that can be regulated, except for some sectors such as mining and trading of these assets.

Waller’s speech actually ends up making governments in other countries open their eyes to stablecoins. As the dollar is currently the strongest fiat currency, the ease of exposure to it could topple other currencies.

A good example of this defense can be seen in India, where the government will be voting to ban private cryptocurrencies next week. Despite this, it is possible that currencies such as BTC, as opposed to stablecoins, may continue to be used as assets, just like gold.

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