Central banks could use stablecoins instead of developing their digital currencies, New York Federal Reserve research adviser Antoine Martin said at an event in London. Martin previously wrote that stablecoins are unlikely to have a place in the traditional financial system.
“Rather than producing retail currency [central bank digital currency], central banks might support stablecoins by allowing them to be backed individually with balances in a central bank account,” Antoine Martin, financial stability consultant at the Federal Reserve Bank of New York, explained. “Adapting our regulatory and legal environment to support stablecoins is already a daunting task, but probably easier than running a retail CBDC, especially since the private sector is currently providing all retail digital cash in outdated technology,” he said lawmakers at the Gilmore Center Policy Forum at Warwick Business School in London, according to a statement.
Martin compared stablecoins to Chinese payment platforms Alipay and Tenpay, describing them as “very close relatives.” When users of these services transfer money, the platforms must hold the equivalent in yuan with the Chinese central bank, just like stablecoins.
A possible shift in thinking
The comment hinted at a possible rethinking of stablecoins, as the adviser to the New York Federal Reserve previously argued that stablecoins “are unlikely to be the future of payments,” according to a blog post published in February. The authors said that stablecoins “that don’t tether liquidity are risky and less fungible,” suggesting their use within a banking system would be unreliable. Existing forms of digital money are enough and could be adapted by issuing token deposits, added Martin and others.
In another April 2021 New York Fed blog post, Martin wrote that stablecoins are “riskier” than CBDCs because “the value of the assets backing the currency could fluctuate or, despite promises made, those assets may not exist.” are.” The authors also noted that, unlike CBDCs, “some stablecoins are still trying to avoid a central intermediary.” While the New York Fed recently launched a pilot regulated-liability network for private banks to deal with “Experimenting with digital liabilities, the Fed previously expressed a slower and more calculated approach to developing a digital dollar. We haven’t seen making that decision for a while,” Fed Chair Jerome Powell said in September.