Australian central bank Governor Phillip Lowe stated {that a} private resolution “is going to be better” for cryptocurrency so long as dangers are mitigated by regulation.
Lowe commented at a latest G20 finance assembly in Indonesia. Reuters reported on July 17 that officers from different international locations mentioned the influence of stablecoins and decentralized finance (DeFi) on international monetary methods.
Recent dangers related to stablecoins can largely be chalked as much as depegging occasions. In May, the Terra USD stablecoin UST, which has since modified to Terra Classic USD (USTC), misplaced its peg and drove down the worth of your complete Terra Classic ecosystem. It triggered a multi-billion greenback cascade impact resulting in Tether (USDT) and the DEI stablecoin briefly depegging.
Lowe advised that robust laws and even state backing might assist mitigate the dangers to the general public.
“If these tokens are going to be used widely by the community, they are going to need to be backed by the state or regulated just as we regulate bank deposits.”
While the laws would come from the federal government facet, Lowe famous that the technology can be greatest if it had been developed by the private sector. In his view, private firms are “better than the central bank at innovating” one of the best options for cryptocurrency.
He added, “there are also likely to be very significant costs for the central bank setting up a digital token system.”
The National Association of Federally-Insured Credit Unions shared Lowe’s skepticism about implementing a digital token at central banks due to high costs in a letter to the U.S. Commerce Department, according to Cointelegraph on July 8.
However, his view on the costs of digital token systems at central banks is not echoed by the countries currently developing or experimenting with central bank digital currencies (CBDC), such as China, the European Union, and the Bahamas.
In the same G20 meeting, Hong Kong Monetary Authority CEO Eddie Yue backed Lowe’s opinion that stablecoins should be scrutinized more closely. He said that reliable stablecoins would, in turn, reduce risks in DeFi, where stablecoins act as the main transactional currency.
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Referring to DeFi and stablecoins, Yue said, “the technology and the business innovation behind these developments are likely to be important for our future financial system.”
