Professor Gary B. Gorton of the Yale School of Management and Jeffery Zhang of the Board of Governors of the US Federal Reserve System have jointly authored a 49-page paper entitled “Taming Wildcat Stablecoins. Stablecoins”.
The Federal Reserve’s (Fed) research on central bank digital currencies (CBDCs) has continuously expanded to include stablecoins and whether they can be effectively regulated.
“Taming Wildcat Stablecoin” is publish on July 17 SSRN, Gorton and Zhang argued that “privately created currencies” like stablecoins “are not an efficient medium of exchange because they are not always accepted in equal parts.” The authors then propose solutions to tackle 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 from 1837 to 1864, the researchers concluded that policy makers 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.
For the ability to equate stablecoins with public money, the government may require that stablecoins be issued through banks insured by the Federal Deposit Insurance Corporation (FDIC) or require that all stablecoins be issued. Stablecoins must be fully secured.
The article appeared on Twitter yesterday (July 18). Avanti founder Caitlin Long made an interesting connection between release day and an upcoming stablecoin working group led by Treasury Secretary Janet Yellen.
HERE’S NEW PAPER from Fed (+ Yale) showing regulatory options for the US dollar #Stablecoins. Interesting – it was published yesterday (on a Saturday) and its first footnote refers to tomorrow’s big meeting of the President’s working group on the matterhttps://t.co/gfGWDbjjA4 pic.twitter.com/5VwMlnErHJ
– Caitlin Long (@CaitlinLong_) July 18, 2021
Starting today (July 19), Yellen will convene a working group for 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). During a hearing in front of the House of Representatives on July 14, Powell said that due to their extreme price volatility, cryptocurrencies are not going to get into the payment system anytime soon.
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, China has become a leader in the issuance of a centrally controlled digital currency.
Teacher
According to Cointelegraph
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