By Shelly Melancon (Switzerland)
Governor Christopher J. Waller, a member of the federal reserve system board of governors, has opined that private stablecoins are more advantageous than Central Bank Digital Currencies (CBDC). He further said that the premise of the CBDC is “a solution for a problem that doesn’t yet exist.” He also remarked that a private digital dollar is more effective than a CBDC in several ways.
“I am strongly convinced that a CBDC won’t challenge banks’ markup charges better than private-sector innovations. Even though commercial banks earn commissions through their market power, non-banks can also earn a share of the market by providing cheaper services. This is happening already as there has been a rise in the number of non-banks providing payment settlement services.”
Stablecoin Can Reduce Payment Costs
Waller also shared his opinion on the usefulness of stablecoins and how they can reduce charges for payment services. He emphasized that “recently, ‘stablecoin’ systems have become one of the top non-bank kinds of payment settlement systems. As digital assets whose value is linked with a sovereign currency and other assets, they are potentially useful as an enticing payment instrument. However, they need to be pegged to the sovereign currency and be supported by a liquid pool of assets.”
Waller also opined that stablecoins enhance US monetary policy and policy actions since they are pegged to the US dollar. He further said that commercial banks pegged to the dollar also perform similar roles. In his concluding remarks, Waller said these private stablecoins are helping the reach of the country’s monetary policy and not harming it.
Circle Seeks To Become A Federal Bank
Meanwhile, top stablecoin issuer, Circle, revealed today that it would soon become a “national cryptocurrency bank.” if that becomes a reality, Circle will become an oversight function of the federal reserve bank and other US treasury departments. The firm’s CEO, Jeremy Allaire, revealed via a post on the company’s blog that the move is to improve the capability of its stablecoin, USDC.
Financial regulators scrutinized USDC last month following revelations that the Circle’s reserves included commercial paper and corporate bonds even though most of the USDC reserve were dollar-backed. Circle’s operations are legislated under state money transmission laws, and they are less strict than the regulations for national banks.
However, Allaire failed to clarify whether Circle will replace its reserves bonds and papers with their dollar equivalents once it becomes a national bank. He only stated that Circle’s liquidity has “always been more than” than banks as stipulated by Basel III, an international agreement for bank liquidity.
But Circle already knows that its operations’ reports would be more expansive than it currently is once it becomes a national bank, especially as it relates to its reserves. This news follows the increasing popularity of stablecoins and their use cases in the financial landscape. If it becomes a federally regulated entity, Circle will follow the footsteps of two other stablecoin issuers Paxos (a blockchain infrastructure provider) and Anchorage (a custody provider).
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