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

Digital Identity Startup Unstoppable Domains Secures $65 Million in a Series A Led by Pantera Capital
Digital Identity Startup Unstoppable Domains Secures $65 Million in a Series A Led by Pantera Capital On Wednesday, the Web3 digital identity platform Unstoppable Domains announced
Global Cryptocurrency Trade Volumes Saw a Significant Decline in December 2022
Global Cryptocurrency Trade Volumes Saw a Significant Decline in December 2022 According to statistics, daily cryptocurrency trade volumes have dropped significantly during Dec. 20
World Gold Council Exec Believes Blockchain Technology Will Bolster Trust in the Gold Industry
World Gold Council Exec Believes Blockchain Technology Will Bolster Trust in the Gold Industry The World Gold Council’s (WGC) head of global sales and regional CEO, Joe Cava
A Mysterious Airdrop Called EIDOS Is Clogging EOS to Make a Point
EOS has been clogged up by a giant airdrop for a token called EIDOS – and it’s not clear the token is even good for anything. In fact, it seems as though the people behind t
Estonia, US Arrest 2 Suspects in $575 Million Crypto Fraud Scheme
Estonia, US Arrest 2 Suspects in $575 Million Crypto Fraud Scheme Law enforcement officers from Estonia and the United States have arrested two men for allegedly committing a large
Bank of Russia to Monitor Banks’ Dealings With Crypto Exchangers
Bank of Russia to Monitor Banks’ Dealings With Crypto Exchangers The Central Bank of Russia has started to examine the operations of Russian banks with cryptocurrency exchangers,
Costa Rica Might Be the Next Country to Establish Bitcoin as Regulated Currency
Costa Rica Might Be the Next Country to Establish Bitcoin as Regulated Currency Costa Rica could be one of the next countries to adopt bitcoin as a regulated payment method. This w
Bitcoin Liquidity Blocks Tell A Story: Here’s Why $96,000-$111,000 Is Most Important
Este artículo también está disponible en español. Although Bitcoin price action is still holding above the $100,000 price level, the past 24 hours have been highlighted b
US Consumer Price Index Rises 0.1% in March, Annual Inflation up 5% From Last Year
US Consumer Price Index Rises 0.1% in March, Annual Inflation up 5% From Last Year On Wednesday, the U.S. Bureau of Labor Statistics published the Consumer Price Index (CPI) report
Uniswap cites Chevron in another urge for SEC to drop bid to rule over DeFi
Felix Ng7 hours agoUniswap cites Chevron in another urge for SEC to drop bid to rule over DeFiUniswap Labs argues the SEC’s proposed legal amendments to give it power over DeFi are being made against “a legal backdro
Eigen Labs acquires Rio Network, opens LRT code
Ana Paula Pereira6 hours agoEigen Labs acquires Rio Network, opens LRT codeThe Eigen Foundation is acquiring Rio Network’s intellectual rights and will open-source its liquid restaking token as a reference implementati
Victoria Kennedy11 hours agoAI could revolutionize human resources, but there are risksWhile AI has the power to revolutionize human resources, it also leaves HR professionals open to certain risks.410 Total views47 Tota