Reserve Bank of Australia calls for private solution to cryptos if…
According to Phillip Lowe, Governor of the Reserve Bank of Australia, a private solution for cryptocurrencies “is going to be superior”. That is, as long as the risks are reduced by regulation.
Lowe voiced those views at a recent G20 financial summit in Indonesia. During the same period, officials from various countries reportedly spoke about the effects of stablecoins and DeFi on international financial institutions.
Recent stablecoin dangers can be mostly attributed to unpeg events. The value of the entire Terra Classic ecosystem plummeted in May when the Terra USD UST stablecoin, now known as Terra Classic USD, lost its peg.
Technology better in the hands of the private sector
Strict rules or even state support, according to Lowe, could help reduce the risks to the general population. Although the government is responsible for regulation, Lowe stressed that the private sector would be best placed to develop the technology.
According to him, private companies “innovate” the best features for cryptocurrencies “better than the central bank“. He said,
“If these tokens are to be widely used by the community, they will need to be supported by the state or regulated much like we regulate bank deposits.”
So-called central bank digital currencies (CBDCs), which can be either retail tokens used directly by customers or wholesale tokens used by banks in the financial system, are being developed by many central banks around the world.
This is partly a reaction to the emergence of so-called stablecoins, privately-issued tokens like Tether and USDC, whose value is tied to that of a traditional asset, often the US dollar. . These are generally used as stores of value and for payment purposes.
In a statement to the U.S. Department of Commerce, the National Association of Federally-Insured Credit Unions echoed Lowe’s concerns about the high expenses associated with rolling out a digital token at central banks.
China, the European Union and the Bahamas are currently developing or testing the CBDC. Needless to say, they do not share this view on the costs of such systems in central banks.
A stronger regulatory system may be needed
To develop a strong enough regulatory system for these tokens, Lowe and other panelists agreed that more work needs to be done. A closer look at stablecoins, according to HKMA CEO Eddie Yue, might also be helpful.