Over the past two decades, there have been significant changes in how we spend and manage money. The Inception of contactless payment, mobile banking, cryptocurrencies, Central Bank Digital Currency (or CBDC) and rapid rise of privately issued stablecoins has motivated central banks to step up efforts to explore their own fiat Stable Tokens.
According to a recent Bloomberg report, Bank of America crypto strategists Andrew Moss and Alkesh Shah wrote that CBDCs “are an inevitable evolution of today’s electronic currencies,” They wrote:
“We expect stablecoin adoption and use for payments to increase significantly over the next several years as financial institutions explore digital asset custody and trading solutions and as payments companies incorporate blockchain technology into their platforms.”
While CBDCs are government issued, stablecoins, on the other hand, are issued privately on supporting centralised and/or decentralised blockchain networks. Fundamentally used for the same purposes, CBDC's and stablecoins are evolving rapidly with both monetary authorities and private institutions issuing stabilised cryptocurrencies as viable, mainstream payments vehicles serving as a possible breakthrough innovation in the future of payments
In its latest global regulatory outlook report, Ernst & Young (EY) recommended that banks adjust their regulatory perimeter to accommodate the incoming launches of state-backed central bank digital currencies (CBDC) and private stablecoins.
With Digitisation transforming the global financial environment, one of the most vital areas is the provision and facilitation of digital currency like e-Money.com's suite of European currency-backed Stablecoins that are set for rapid expansion in 2022.
With more than four-fifths of the world’s central banks engaged in pilots or other central bank digital currency (CBDC) activities, the European Central Bank and the US Federal Reserve both recently announced they were progressing their ‘CBDC’ projects into a more detailed phase. However, the Federal Reserve is approaching the development of CBDCs carefully as there has been concern that by centralising Americans' financial information and holdings in a digital database controlled by the U.S. government, CBDCs would create an authoritarian surveillance state and constitute a severe overreach of government power.
Meanwhile, China’s e-CNY, its new state-backed digital currency, has entered a robust pilot phase. China’s central bank — the People’s Bank of China — and other financial institutions oversaw the testing of the digital yuan across the country last year. its been reported that China is planning to officially launch e-CNY in 2022, a reminder that CBDCs are in the process of permanently altering global commerce and a development that will create a sense of urgency among other governments.
With the rapid emergence of digital currencies in the private sector, it was always inevitable that governments would get involved with their own regulated alternatives. This transition will lower transaction costs, prevent criminal activity, bring more people into the financial system, and provide governments with more flexibility in the development of monetary policy. Physical currencies were already in the process of being phased out, and governments have every reason to hasten this process with the establishment of their own CBDCs.
Some analysts, believe 2022 could be a big year for Stablecoins and there’s room for privately issued Stablecoins to exist alongside a possible central bank digital currency, according to Federal Reserve Chair Jerome Powell.
During Jerome Powell’s Jan. 11 United States Senate confirmation hearings, Senator Pat Toomey asked Powell whether there’s anything that would preclude a “well regulated, privately issued Stablecoin” from coexisting with a potential Fed digital dollar, Powell said “No, not at all.”
Per a January 25 announcement, The House of Representatives will hold a virtual hearing on February 8 entitled “Digital Assets and the Future of Finance: The President’s Working Group on Financial Markets’ Report on Stablecoins.”
Just one week after the Senate will take its own look at the issue. The Senate Banking Committee has slated a February 15 hearing entitled “Examining the President’s Working Group on Financial Markets Report on Stablecoins”.
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