How should central banks respond to digital technology? This is an urgent issue. Part of the answer is that both they and the government must keep track of the new wild west of private funding. But it also means that they now have to introduce their own digital currencies.
The state must not abandon its role in ensuring the security and ease of use of money.The idea that it should be Libertarian fantasy.. Moreover, action is now an urgent need.according to A treatise by Gary Gorton of Yale University and Jeffrey Chan of the Federal Reserve Board of Governors, Innovators are currently creating over 8,000 cryptocurrencies.
Gorton and Zhang categorize these works into two main categories. “Legal cryptocurrency” without backing such as Bitcoin. And “stablecoins” are backed one-on-one by government fiat money. Both have problems in many ways.
Write in FT, Roger Svenson He claimed that fiat currency did not meet any of the criteria for available money. Bank for International Settlements (BIS) In the latest annual report, such “cryptocurrencies are speculative assets, not money, and are often used to promote them. Money laundering, ransomware attacks and other financial crimes.. Bitcoin, in particular, rarely uses public interest attributes, given its wasted energy footprint. In my view, such “currencies” should be illegal.
Stablecoin is different. As Gorton and Zhang argue, money must be available for “question-free” payments in the event of a crisis. Historically, there have been practices from banks for this reason: that’s why they are backed and regulated by the state. The same concern arises with Stablecoin. The crisis could result in a “run” similar to that of a 2008 money market fund.Therefore, stable coins are backed one-on-one with central bank money, or the issuer Regulated as a bank..