In its initial stage, cryptocurrency was mostly a niche thought that was restricted to the earliest supporters who made use of them and as a result of this, most of the concerns surrounding it were limited to this group of people. However, cryptocurrency has gone on to surpass its initial stages and is now being used widely across the globe at a growing rate and is receiving more press attention than ever. As a result of this, more attention is being given to what cryptocurrencies mean for the larger global economy as well as the smaller local ones.
According to the United States Federal Reserve’s November report that was published on November 15, 2019, stablecoins could save as a complement to other currencies and financial systems but will require constant checks lest they constitute the risk.
Checks and Balances
It is interesting to note that the Federal Reserve did not dismiss stablecoins altogether but stated that should they continue to be used within the market, then they must adhere to regulatory standards.
“Innovations that foster faster, cheaper, and more inclusive payments could complement existing payment systems and improve consumer welfare if appropriately designed and regulated,” the report explains says,“However, the possibility for a stablecoin payment network to quickly achieve global scale introduces important challenges and risks related to financial stability, monetary policy, safeguards against money laundering and terrorist financing, and consumer and investor protection.”
The report also made mention of Facebook’s Libra token and stated that it is a system that could achieve widespread adoption if launched. This is rather surprising as Facebook has seen mostly criticism from regulatory bodies and lawmakers since the white paper for the token and it’s Calibra wallet was announced. However, the Federal Reserve’s report also states that if a stablecoin system is poorly designed, it could potentially threaten financial stability.
The matter of stablecoins is rather interesting as it seems to have mixed reactions both within and outside the crypto community. Some in the community do not see them as pure cryptocurrencies and thus, do not subscribe to them but many outside of the cryptocurrency industry see them as a balance between the fiat and crypto worlds and it seems that private firms and governmental bodies are more attuned to the idea of stablecoins.