Digital Currency and the Next Financial Crisis

In 2019 when Facebook announced plans to issue a new global stablecoin, Libra, governments took notice. The potential for Libra to be seamlessly adopted by more than 2.3 billion Facebook users challenged the idea that governments alone are vested with the power to issue “money” and raised legitimate concerns about the impact of stablecoins on financial stability.

 
The G-20 governments directed the Financial Stability Board (FSB) to study the implications of privately issued stablecoins and make recommendations regarding the need for new regulations. In addition, several central banks, including the Federal Reserve, began studying the idea of issuing their own “digital currency” to directly compete with stablecoins. When recently questioned about the Fed’s position on digital currency, Chairman Powell responded, “You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies, if you had a digital US currency. I think that’s one of the stronger arguments in its favor.”

If a major reserve currency central bank like the Federal Reserve issued its own digital currency (FRDC) and made it available globally, it would diminish the appeal of stablecoins. Although FRDC may reduce the financial stability issues associated with stablecoins, they create their own stability issues. In this essay, I provide an overview of stablecoins and central bank digital currency, and discuss the financial stability concerns associated with both forms of digital money.

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Πηγή: lawliberty.org