FED: Stablecoins Threaten the Financial Stability

FED interest rate

In a report released on Nov 15. the FED warns that stablecoins pose a threat to financial stability for the US and international community. In the Financial Stability report the FED states that is closely monitoring the development of stablecoins and that such coins need to adhere to strict regulatory demands or be shut down immediately to protect national and international interest.

The FED warning states the following:

“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 most likely gripe regulators have with stablecoins or any cryptocurrency in general is their lack of control over the network and actors within it. This can especially be seen with privacy focused projects that have suffered from extreme scrutiny and exclusion from many exchanges due to allegations that their privacy features enable malignant actors to launder money.

US plans a fractional reserve coin

While Libra is still battling with regulators and China is making quick progress with its blockchain technology strategy US President Donald Trump teased plans to create a fractional reserve stablecoin. The coin would not be fully backed by reserves and thus makes one wonder if such a project could even be called a stablecoin.

What do you think? Would an official fractional reserve stablecoin from the US have a future within the crypto community?


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