Here is our pick of the 3 most important stablecoin stories during the week.
Are CBDC’s too dangerous to allow?
CBDC implementations have the potential to be very dangerous in terms of personal freedom and political liberty. Can we design out the danger but keep the good stuff? This will be the big debate in western democracies in the next two years.
But first, the alternative to CBDC’s, private sector issued stablecoins had another bad week. The HUSD stablecoin, which is issued by Stable Universal, has fallen to 92 cents, an 8% drop from its planned $1 peg, according to CoinMarketCap prices.
Crypto advocates in the U.K. have largely welcomed a new bill that could bring digital assets like stablecoins into the scope of local payments regulation. But there’s uncertainty about how the new rules will look like, should the bill pass.
The bill is scheduled to be debated in Parliament for the first time in September. It will move through a complex legislative process that could be slowed further by the recent cabinet shuffle, and crypto advocates are awaiting indications from regulators on how they plan to interpret and enforce the rules.
The European Central Bank (ECB) said that the introduction of digital cash in the form of central bank digital currencies (CBDCs) appears to be the “only solution” that will guarantee a “smooth continuation” of the current monetary system as physical money loses its economic “fitness” and cryptocurrencies and Big Tech (large digital platforms) continue to make inroads into the financial system.
“There is no regulatory alternative that promises to eliminate the threat to the two‐layer monetary system. Since cash is only available in physical form, it is by construction not ‘fit’ for the digital age.”
The importance of central banks achieving the right level of CBDC “take-up” was stressed, and the authors also looked at potential regulatory action that could help CBDCs achieve their goals.
And there you have it, if the State can’t win consumer take up by building a great product, the temptation is to change the rules so you have to use it. Kitco reports that newly inaugurated Colombian President Gustavo Petro’s government intends to create a new digital currency to help prevent illicit financial activity, including tax evasion. The country estimates that tax evasion accounts for 6-8% of Colombian GDP. But what it will really do is make it easier for governments to track consumers’ purchases and tax them.
So in summary, the State can use regulatory change to make you use it and money surveillance to enforce taxation but why stop there when you can now defund political opponents. This would make the raid on Mar-a-Largo look like very small potatoes?
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.