It is reported that Facebook may launch its long-awaited digital currency as early as January 2021 in the form of a stable currency backed by the US dollar. Central banks and regulators have been spurred to take action since Facebook first announced its intentions by publishing a white paper in 2019. They are right to be concerned that the hoarding coins – especially the aforementioned Diem, which has the potential to create massive network effects – are bringing New to the risks to consumers and savers, as well as to the global financial system.

Relatives: how much weight? Smash the new digital currency on Facebook

But it can also provide significant benefits in terms of speed, efficiency and affordability. They can act as a store of value in countries that do not possess a stable national currency, such as the dollarization found in many emerging market economies today. Well-regulated stacked coins with appropriate legal, regulatory and governance controls play an important role in the global economy and can bring the benefits of crypto technology to a whole new generation of users.

Dim, formerly known as Libra, is the most popular stablecoin. This has been discussed since Facebook first announced its intentions in 2019. In fact, Demoux is widely credited with adding rocket fuel to the still-slow central bank investigations into central bank digital currencies, or CBDCs. It also sparked a lot of excitement from the global regulatory community, which has since developed strict rules for stable currencies.

Why are conservatives and central banks so concerned about stable currencies? Is this a role for them?

Stable currencies are cryptocurrencies that seek to stabilize the value in relation to another asset – be it a paper currency, a basket of fiat currencies, or commodities. The idea is that by fixing value, it can be used as a method of payment.

Related: Stable Coins, caption

This is something the previous generation of cryptocurrencies failed to achieve – Bitcoin (BTC), etc. Bitcoin remains very volatile, as evidenced by the price dynamics of the past month.

Stable coins are a completely different kettle. By their very nature, they are intended to be used as a “store of value”, which is the most important characteristic of money, and thus can be used as a means of payment.

There’s also the potential for massive network effects to happen with DEEM. Facebook has 2.7 billion monthly active users, which means Diem can instantly become an “exchange” in large parts of the world.

There is a risk. Secure wallet storage, good corporate governance and oversight, anti-money laundering, data protection, tax compliance, and cybersecurity are known risks that need to be managed. Stable currencies carry additional risks, not the least of which is ensuring that the underlying asset is properly backed and that all necessary controls are in place to manage that stock.

Stable currencies, which have become global success stories, create more problems. It can have serious implications for current financial systems if consumers and savers try to obtain these currencies instead of their local currencies. It may even have implications for a country’s monetary policy and, ultimately, economic growth. This is why global regulators are so busy.

In October 2019, the G-7 released its Stable Currency Working Paper. While we recognized the benefits that stable currencies could provide in the form of “faster, cheaper and more inclusive” global payments, we focused on the legal, regulatory and regulatory challenges of this new innovation. The document highlights the risks to “monetary policy”, “financial stability”, “international monetary system” and “fair competition”.

The organizers are now working to address these issues. This fall, the European Commission presented a comprehensive legislative proposal to regulate cryptocurrencies. While this applies to all crypto assets, it introduces particularly stringent requirements for issuers of “asset-linked tokens” (stablecoins) and even stricter requirements for “asset-related tokens” (global stablecoins). Here, UK Treasury, UK Treasury Department plans to release draft stablecoin and CBDC regulations soon.

These rules are welcome. Stable currencies can improve the efficiency of the existing financial system by offering faster and cheaper payments, especially for money transfers. They can also improve access to financial services and can offer savings to savers in countries where there is no stable national currency. Stable currencies are properly regulated and regulated and can bring cryptocurrencies to a whole new generation of users.

Source: CoinTelegraph

LEAVE A REPLY