At the recent G20 gathering, Phillip Lowe, the governor of Australia’s central bank, suggested that controlled private tokens would be preferable to CBDCs.
Meanwhile, the Bank for International Settlements conducted a poll recently. The result showed that 90% of central banks globally were moving toward creating a virtual currency.
Some are currently doing tests. Others have launched their CBDCs for retail or wholesale usage. The retail CBDCs are for consumers, while wholesale CBDCs are for central banks.
Examples of private tokens incudes Tether’s USDT and Circle’s USDC. Also, issuers of private tokens have to maintain sufficient reserves. The aim is to cover the one dollar supply for every redeemed token.
Since the crash of the TerraUSD stablecoin, regulators have been waiting for stablecoins. Also, several executives and regulators have called for the regulation of stablecoins.
Recently, Gillibrand and Lummis proposed the Responsible Financial Innovation Act in the US. The bill only allows the issuance of stablecoins with adequate collateral or assets backing it.
Lowe Says CBDC Development Is Expensive
Furthermore, Lowe said authorities should treat deposits made to stablecoin issuers like bank deposits. Hence, the same regulation should apply to both of them.
With proper regulations, a private token is better than a CBDC, Lowe added. He believes creating a CBDC would be expensive for the central bank.
This is because the private sector is better in terms of developing functionality for tokens. Meanwhile, Eddie Yue, the CEO of the Hong Kong Monetary Authority, also agreed with Lowe.
He noted that more examination of stablecoins might help prevent DeFi crisis. Also, Yue said there should be order regulation of stablecoins and not just the DeFi sector.
According to Yue, the DeFi industry is an important sector. It is among the key technologies to watch for long-term financial innovation.
FSB To Create New Crypto Regulations For G20 Nations
On July 11th, the FSB (Financial Stability Board) of the G20 nations said it would implement new crypto regulations in October. Entities that make up the FSB include central bankers, regulators, and treasury executives.
So far, the FSB has maintained its exposure to cryptocurrency to a minimum level. This is so it could monitor the market. However, recent events have unraveled systemic threats to the larger financial system.
These include the recent demise of the TerraUSD stablecoin. Also, there is the collapse of the crypto market, which has made several firms bankrupt.
Meanwhile, the Indonesian central bank gov said at the G20 meeting that the country is exploring CBDCs. Presently, the state allows crypto trading alongside commodities futures.
