Fun

Regulate Stablecoins – Don’t Squash Them

News Feed - 2019-10-23 07:10:21

Nathan Kaiser is a founder of Eiger Law and a fellow at the Berkman Klein Center for Internet & Society at Harvard University. He has two decades of professional experience in Greater China focusing on corporate law and the convergence between technology and law.


The views expressed here are his own.


Recent developments with blockchain-based payments systems and stablecoins have invited close scrutiny from government regulators and policymakers. While some of these projects get headlines, policymakers should take note of the People’s Bank of China proposal for a digital currency backed by the yuan that could be used across major payment platforms such as WeChat and Alipay.


Global competition for the next wave of financial innovation is heating up. China, South Korea, Japan and much of Europe have moved fast to embrace mobile wallets and contactless payments through credit cards and other smart devices. Commoditization of mobile devices across Africa, the Middle East, and Asia brings the hope of new capabilities and economic empowerment opportunities for unbanked and underserved consumers and businesses.


Consumers see financial innovation as a means to break down legacy inefficiencies, increase access and lower the cost of financial services. While cryptocurrencies have mainly been vehicles for financial speculation because of their significant volatility, new stablecoins move closer to meeting consumer demands for more secure and faster transaction options. The value to underserved populations is evident from the potential utility and ease of use that specialized financial services products built off innovations such as stablecoins could offer.


However, people are still concerned with protecting their funds, controlling their data, and handling disputes. It is thus in the interests of the major developed economies of the world to help shape the regulatory framework around financial innovations to address compliance and consumer protection concerns.


That is what a number of international regulators and supranational bodies such as the IMF, G20, and FATF regularly address issues surrounding new mechanisms or innovations on the cusp of becoming consumer products. Promise and peril


The G7 working group report on stablecoins published last week makes clear that consumer participation in financial services is rapidly changing and that innovation will continue to expand. The report shows that financial overseers understand the need for a viable framework for these new, ambitious projects that seek to transform digitally native interactions with money and value. It foresees a strong role for the public and private sectors in innovation to reduce friction and recognizes the considerable network effects that private mobile networks have already achieved to bring down the cost and increase reliability and speed of payments.


The report also articulates regulators’ concerns that will need to be satisfied with regard to the potential for market manipulation, the risks stable coins pose to legacy financial systems, and the lack of a clear global regulatory framework. The fear is that stablecoin systems – while decentralized by design and transparently governed by a collection of companies and non-profits, and that abide by the rules and regulations set forth by the U.S. Congress and the international community – could undermine the banking system, embolden money launderers, or cause cracks in the global monetary system.


The potential loss of government sovereignty over currency and monetary policy is also a key concern for some policymakers. They should examine whether that is really going to be the case and also consider the potential benefits of stablecoins pegged to G7 currencies like the dollar, euro or yen that enhance the utility and efficiency of these major currencies globally – as opposed to, say, a yuan-backed stablecoin that extends China’s influence across the global economy and financial system.


Just as changing consumer habits across the technology and financial services landscape have pushed companies to reimagine how the global economy buys and sells goods and services, the intense public scrutiny of stablecoins is now pushing organizations developing these systems to ensure appropriate regulation. They will need to collaborate with government bodies to ensure any new system is safe, secure, and complementary to the existing financial system.


Likewise, regulators should offer a path for stablecoins to exist alongside current financial systems and under regulatory environments. And elected officials and policymakers should give regulators time and space to formulate a regulatory environment, allowing oversight agencies around the world to ensure a globally consistent approach.


Dollar bill image via Shutterstock

News Feed

Ethereum price weakens against Bitcoin — Here’s why
Nancy Lubale4 hours agoEthereum price weakens against Bitcoin — Here’s whyEthereum price stagnates in its ETH and BTC pair as investors’ expectations for a spot ETH ETF dwindle.1115 Total views25 Total sharesListen
Adult Film Star Lana Rhoades Deletes Twitter Account After NFT Project Was Criticized
Adult Film Star Lana Rhoades Deletes Twitter Account After NFT Project Was Criticized Adult film star Lana Rhoades is being criticized for her non-fungible token (NFT) project call
Turner Wright11 hours agoSam Bankman-Fried’s lawyers push for temporary release, object to prosecutors’ proposed dealThe U.S. Justice Department has produced “millions of pages of documents” related to SBF’s cr
Savannah Fortis10 hours agoFrench telecom group invests millions in local AI industryThe French telecom group Iliad revealed it has purchased one of Europe’s most powerful supercomputers and plans to create an AI resea
US Court Convicts ‘My Big Coin’ Founder in $6 Million Fraudulent Cryptocurrency Scheme
US Court Convicts "My Big Coin" Founder in $6 Million Fraudulent Cryptocurrency Scheme A federal jury has convicted the founder of “My Big Coin” in a fraudulent schem
Trading on crypto exchanges fell for 3rd month straight in June: CCData
Tom Mitchelhill7 hours agoTrading on crypto exchanges fell for 3rd month straight in June: CCDataCombined spot and derivatives volumes on centralized crypto exchanges fell 21.8% in June as crypto exchanges continued to t
Bitcoin price downside may last 2 months — Analysis
Zoltan Vardai11 hours agoBitcoin price downside may last 2 months — AnalysisBitcoin could experience another two months of downside pressure before a bullish chart pattern could lead to a breakout.7605 Total views9 Tot
New Zealand VC Launches $5 Million Web3 and Crypto-Focused Fund
New Zealand VC Launches $5 Million Web3 and Crypto-Focused Fund New Zealand-based venture capital firm Global From Day 1 (GD1) recently said it had launched a $5 million Web3 and c
Visa Files Patent for Cryptocurrency System to Replace Cash
Visa Files Patent for Cryptocurrency System to Replace CashVisa International has filed for a cryptocurrency system patent that is meant to replace physical currency. The system, wh
Porn Industry Thrives During Lockdown — These Sites Are Cryptocurrency-Friendly
Porn Industry Thrives During Lockdown — These Sites Are Cryptocurrency-Friendly Porn sites have been experiencing increased traffic as the number of people under lockdown or qu
DYP Launches Staking and Governance DAPP
DYP Launches Staking and Governance DAPP DeFi Yield Protocol (DYP) has launched its staking and governance DAPP that looks to improve earning opportunities for u
Jesse Coghlan7 hours agoHong Kong police, regulator form crypto task force as JPEX saga unfoldsThe joint group was established in light of the ongoing crypto scandal in Hong Kong involving the JPEX crypto exchange.5379 T