US Federal Reserve Chair Jerome Powell has announced in a prepared speech to camera it would consult the public about a potential central bank digital currency (CBDC) in the summer.
He acknowledged both the benefits and risks of stablecoins, hinting that new regulations are coming, according to Ledger Insights. The US Federal Reserve Chair said that the tech behind stablecoins has the potential to enhance payments efficiency, speed up settlement flows, and reduce end-user costs.
Regulatory and oversight framework includes paying attention to private-sector payments providers who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries.
Some concerns regarding stablecoins raised by the regulator include redeeming these money en masse - with a chunk of reserves held at banks, that could cause massive bank account withdrawals. A bigger perceived risk by central banks is the Facebook-associated stablecoin Diem. If USDC can experience this sort of exponential growth without a userbase like Facebook, how fast could Diem become massive?
Therefore, the question is whether Diem and rapid stablecoin growth has triggered a change in the urgency of a CBDC. To learn more about CBDCs, download our ebook Central Bank Digital Currencies for Beginners – A Quick Guide into CBDCs.
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