CBDC Is A “Better” Alternative to Stablecoins, Which Are Unlikely to be Regulated Money: BoE Governor

CBDC Is A “Better” Alternative to Stablecoins, Which Are Unlikely to be Regulated Money, says BoE Governor

Andrew Bailey, the Governor of Bank of England, yet again shared his criticism of stablecoins as he said that he did not believe that stablecoins are likely to evolve into safe, regulated money, which means central bank digital currencies (CBDCs) will more likely be the future for electronic payments.

“I think we have two choices broadly,” Bailey told lawmakers in the upper house of Britain’s parliament as part of an inquiry into the future of digital payments.

“Is it going to evolve to some world of (asset-) backed stablecoins which has money-like features which could be regulated? I must say … I am sceptical about that. Or … is the better contribution, particularly to financial stability, to say the better alternative to that may be a central bank currency of digital form?”

Commenting on stablecoins, Bailey said out of the $2.5 trillion crypto market cap, which is around the level of the FTSE 100, “95% of it is unbanked crypto-assets,” and the other 5% are stablecoins, “some of which are more stable than others.”

He also warned that crypto-assets do have “all the potential to be a threat to financial stability, which is why we think we do need to take action.”

This month, the BoE and Britain’s Treasury said they would hold formal consultations next year on whether to move forward with a CBDC, which, if approved, would be introduced in the second half of the decade.

On Tuesday, Bailey said he would not expect the BoE to offer digital bank accounts directly to savers.

“We do not see this as the Bank of England moving into the retail bank account business through a central bank digital currency,” he said while speaking to the Lord’s Economic Affairs Committee.

The BoE would instead provide the means of settlements to a regulated platform on which banks and even alternative digital wallets holders would operate. The central bank, Bailey said, would need power over these firms on the platform to protect privacy.

According to him, work on a CBDC was intended to solve cash and retail transactions problems and not as a tool to implement unconventional monetary policy such as a negative interest rate.

Bailey further warned that allowing the private sector to manage the shift toward digital currency could result in the bank regulating big tech firms. “The question we’re going to face is… would we try to regulate” private tech firms creating digital money, he said.

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Author: AnTy

CBDC’s Unlikely To Threaten Cryptocurrencies, Market Has Evolved: Morgan Stanley

CBDC’s Unlikely To Threaten Cryptocurrencies, Market Has Evolved: Morgan Stanley Report

As central banks worldwide continue to establish their digital currencies, one of the largest US investment banks, Morgan Stanley, says they won’t be a threat to cryptocurrencies.

Analysts at Morgan Stanley believe that both central bank digital currencies (CBDCs) and cryptocurrencies would co-exist because they are not the same and serve different purposes.

CBDCs May Threaten Stablecoins But Not Crypto

In a recent report, the analysts said that while CBDCs may not affect cryptocurrency markets as they enter the space, stablecoins probably have the biggest risks in terms of competition.

However, they noted that cryptocurrencies like Bitcoin and the rest that reflect underlying assets would not be affected. BTC 0.00% Bitcoin / USD BTCUSD $ 63,358.91
Volume 77.47 b Change $0.00 Open $63,358.91 Circulating 18.68 m Market Cap 1.18 t
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One of the analysts, Morgan Stanley’s chief economist Chetan Ahya, added,

“Cryptocurrencies will still exist, as they continue to serve other use cases. For instance, some cryptocurrencies can function as a store of value as some segments of the public do not place their full faith in fiat currencies.”

Although some skeptics believe that once CBDCs are introduced, the demand for cryptocurrencies would dwindle.

For instance, the South Korea Central Bank Chief, Lee Ju-Yeol, had stated that CBDCs would reduce the demand for Bitcoin once it launches.

However, Morgan Stanley, in its report, shows this thinking is flawed. According to the analysts, the reasons for investing in cryptocurrencies appear to have evolved. Buyers are now viewing digital assets like Bitcoin as new institutional asset classes rather than replacement payment systems.

According to the bank, investors’ interest in cryptocurrencies has risen over time alongside the pandemic’s unprecedented monetary and fiscal policy response. That is, the current macroeconomic conditions have led to massive interest in cryptocurrencies.

Banks’ Acceptance Of Cryptocurrencies

The traditional banking system seems to have mixed views regarding cryptocurrency and fiat’s digital doppelganger. While most banks are adapting and supporting cryptocurrencies, some aren’t.

Bank Of New York Mellon announced a crypto unit for crypto traders earlier this year, signaling its acceptance of the currency. Other banks like JP Morgan have followed suit with a raft of solutions.

But one bank that has remained anti-crypto is HSBC. HSBC adopted an anti-cryptocurrency policy and censored certain transactions associated with digital tokens’ purchase and sale on its platform.

The British-based bank blocked its customers from depositing from crypto wallets earlier this year. It most recently barred customers of its online trading platform, HSBC InvestDirect (HIDC), from purchasing shares of software company MicroStrategy.

Meanwhile, central banks are increasingly taking steps and making efforts to launch their digital currencies. Research and development efforts are underway at most of the world’s central banks currently.

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Author: Jimmy Aki

ECB President Says Central Banks Are ‘Very Unlikely’ to Add Bitcoin as a Reserve Asset

ECB President Says Central Banks Are ‘Very Unlikely’ to Add Bitcoin as a Reserve Asset

  • ECB President says central banks “are highly unlikely” to add Bitcoin (BTC) as an asset any time soon.
  • The digital euro is still in the works and could be released by 2024, she also said.

In a Business Insider report, European Central Bank (ECB) President, Christine Lagarde, repeated her skepticism on Bitcoin, stating central banks are not looking to add the digital asset as a reserve currency any time soon. During a call with The Economist, Lagarde again said BTC is not a real currency; hence central banks are “very unlikely” to add it to their balances.

“It’s very unlikely – I would say it’s out of the question,” Lagarde on whether central banks will add Bitcoin as a reserve asset.

These, however, are repetitive comments on Bitcoin from Lagarde, who has been against the coin since her appointment to the ECB. Earlier in the year, Lagarde released a statement warning against investment in Bitcoin – stating it is a highly speculative asset and could be used for “reprehensible” money laundering.

However, she believes that there’s room for digital currencies (such as the digital euro) to grow in the coming years. Due to the current global pandemic, governments across have taken a step towards digitization. Agreeing to ECB board members’ proposal, Lagarde stated the ECB is preparing a digital euro, which could be released in the coming four years.

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Author: Lujan Odera