• A recent study claims that fully integrating digital currencies into the economy could destabilize banks while improving household welfare.
• The White House recently released a report criticizing stablecoins, claiming they are too vulnerable to run risks as a „fast payment“ instrument.
• Florida Governor Ron DeSantis has introduced legislation banning the use of CBDCs in his state.
U.S. Treasury Study on CBDC
A U.S. Treasury study has found that fully integrating central bank digital currency (CBDC) into the economy could cause banking sector instability while potentially improving household welfare. The Office of Financial Research (OFR) released a blog post providing insight as to why this is so and offering readers an opportunity for further exploration with a deeper dive into the matter.
White House Report on Stablecoins
The White House recently released their Economic Report of the President which criticized crypto assets for not living up to their promises regarding payment systems and financial inclusion, and expressed concerns over stablecoins‘ vulnerability when it comes to fulfilling its role as a „fast payment“ instrument.
Governor Ron De Santis Legislation on CBDCs
Florida Governor Ron DeSantis (Rep.) introduced legislation earlier this week to prohibit the use of CBDCs in his state, citing potential issues with privacy, monetary policy, and consumer protection regulations associated with them.
While digital currencies may improve household welfare, they can also put banking sector stability at risk due to systemic deleveraging and competition with deposits in households‘ liquidity portfolios. Additionally, even if these risks can be managed, there is no guarantee that digital currencies would be more effective than other solutions when it comes to public welfare improvements overall.
Overall, it appears that U.S regulators are beginning to take notice of both potential benefits and drawbacks associated with digital currencies such as CBDCs and stablecoins respectively; however, whether or not these will be adopted widely remains yet to be seen.