2 min video looking at different ways US regulators are engaging with Digital Assets as The Fed confirms its interest in $CBDC.
Henri Arslanian, Chairman FinTech Association of Hong Kong and PwC Global Crypto Leader, said, “that stablecoins have the potential to bring about a meaningful difference in the cross-border payments sector.” Well, certainly they have been attracting attention as there is now over $20 billion worth of stablecoins in circulation globally.
Stablecoins fall into four different categories, those that are backed by:
· Fiat — Tether (USDT)
· Commodities- Perth Mint Gold (PMGT)
· Cryptocurrencies — MakerDAO (DAO)
· Non collateralised otherwise called algorithmic or otherwise known as Seigniorage Shares- Dark SAGA (SAGA)
The largest stablecoin and accounting for 80% of all the stablecoins in circulation is Tether, capitalised at $15.5 billion. Arguably this is even more remarkable as it was only $3.5 billion a year ago and has increased in size despite ongoing uncertainty as to whether Tether is indeed backed 100% by US$ as it claims to be. If Tether is unable to prove it has insufficient $, it could give create a real shock wave in the Digital Assets sector especially, in the #DeFi sector, where it is often used as collateral.
There are other illustrations of how U.S. institutions are embracing Digital Assets. The U.S. Office of the Comptroller of the Currency recently announced, “We conclude that a national bank may hold such stablecoin ‘reserves’ as a service to bank customers.” This change in tone has been driven by bank clients asking to get exposure to these Digital Assets.
Meanwhile, Kraken — the crypto exchange relocated from NYC to Wyoming and has become the first bank to be authorised to offer customers deposit taking and custody services for Digital Assets.
There has been a huge expansion in the supply of money where in the USA as the government has tried to shield its economy from the ravages of COVID-19 and has had the printing presses on 24/7, which has resulted in a massive $3.87 trillion of cash sloshing around the American economy.
US M1 money in circulation
This may help to explain why we have seen recent headlines such as The Wall Street Journal’s — “Central banks are getting closer to issuing their own digital currency. If they do, the dollar might finally face real competition as the world’s dominant currency” should be of concern to the US government. Headlines like this and the constant innovation in the FinTech sector have not gone unnoticed as The Fed in August 2020 stated, “The Federal Reserve is active in conducting research and experimentation related to distributed ledger technologies and the potential use cases for digital currencies. Given the dollar’s important role, it is essential that the Federal Reserve remain on the frontier of research and policy development regarding CBDCs.”
Expect to see more US institutions and regulators taking a more positive stance towards Digital Assets as they play catch up with recent European proposals and Chinese who have already announced the launch of their CBDC!