The Federal Reserve’s ongoing research into central bank digital currencies, or CBDCs, has expanded to include stablecoins and their effective regulation.

In their paper, published July 17 in the SSRN’s eLibrary, Gorton and Zhang argue that “privately produced currencies” such as stablecoins “are not efficient means of exchange because they are not always accepted and operated for parity”. The authors then propose solutions to address what they believe to be “systemic risk from stablecoins”.

After delving into the history of private money, beginning with the free banking era in the United States, the period from 1837 to 1864, the researchers concluded that policymakers had two options: decisions regarding the stablecoin Regulation: Making stablecoins equal to public money or a CBDC, where private stablecoins that no longer exist are taxed.

In the first option, the government could require the issuance of stablecoins through FDIC-insured banks or require that all stablecoins be fully collateralized with the Treasury Department of the Federal Reserve.

The article appeared on Twitter on Sunday and Avanti founder Caitlin Long caused a sensation connect between the release date and an upcoming stablecoin working group led by Treasury Secretary Janet Yellen.

THIS IS THE NEW PAPER from the Fed (+ Yale), which gives the US dollar regulatory options #Stablecoins. Interesting – it was released yesterday (Saturday) and its first caption refers to tomorrow’s big meeting of the chairman’s working group on the matter. https://t.co/gfGWDbjjA4 pic.twitter.com/5VwMlnErHJ

– Caitlin Long (@CaitlinLong_) July 18, 2021

Starting July 19, Yellen will convene the Presidential Working Group on Financial Markets to discuss stablecoins. The group brings together various regulators to assess the potential benefits and risks of stablecoins.

Discussions about stablecoins have increased lately, with Fed chairman Jerome Powell calling for stricter regulations on assets like tether (USDT). In a statement to the House of Representatives on July 14, Powell said that due to their extreme price volatility, cryptocurrencies are unlikely to enter the payments universe anytime soon.

Connected: According to China’s central bank, crypto gave the impetus to create its CBDC

So far, Fed researchers have been more open to the idea of ​​a CBDC, even though the US, unlike its counterparts in Asia and Europe, has no immediate plans for a dollar. Despite its hostility to Bitcoin (BTC), China has emerged as a leader in the issuance of a centrally controlled digital currency.