Australian Central Bank Governor Prefers Stablecoin Over CBDC. The Governor of the Central Bank of Australia Philip Lowe, private company stablecoins could be superior to digital currencies issued by the central bank (CBDC).
According to him, the comparison is better if the business is managed properly. Phillip Lowe feels there are dangers in dealing with cryptocurrencies that strong regulations can mitigate, but private companies must invent the technology.
This was also echoed by Lowe, in speeches at the G20 finance ministries and the central bank governors’ conference in Bali. The governor of the Australian Central Bank, hesitated to use the words “cryptocurrency” or “asset,” arguing that they did not have the quality of money.
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Lowe believes private money has some problems, and businesses have always wanted to use state-backed currencies. However, he also thinks companies are more likely to develop successful stablecoins linked to traditional currencies than governments are unless there are rules.
If these tokens are to be widely used by the public, they need to be backed by the state or regulated like we regulate deposit banks.
“I tend to think a private solution would be better if we could get the regulatory setup right because the private sector is better than the central bank at innovating and designing features for these tokens,” Lowe said as quoted by Cryptopolitan, Tuesday (2/8/2022).
Lowe also said that there will likely be significant costs for the central bank to set up a digital token system.
Stablecoins are more ideal for private development
While regulation will come from the government, Lowe added it would be ideal if it was developed by the private sector. According to him, private businesses are better than central banks at creating new elements for cryptocurrencies. He added the central bank would also have a significant cost in building a digital token system.
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In other news, Australian officials have suggested a rulebook-style framework is the biggest approach to tackling the dangers associated with crypto. Rather than regulating cryptocurrencies directly, the goal is to regulate crypto exchanges.
The National Association of Federally-Insured Credit Unions, in a letter to the US Department of Commerce, expressed Lowe’s disapproval of placing digital tokens in central banks because of the high fees.
However, countries that are currently developing or experimenting with central bank digital currencies (CBDC), have yet to share their views on the cost of digital token systems in central banks.
Stablecoin Risk
Australian Central Bank Governor Prefers Stablecoin Over CBDC. According to a Reuters report on July 17, officials from other countries discussed the influence of stablecoins and decentralized finance (DeFi) on the global financial structure. Depegging events are the latest risk associated with stablecoins.
In May, stablecoin Terra USD UST, which has since been renamed Terra Classic USD. UST lost its stake and caused the market value of the entire Terra Classic ecosystem to plummet. This triggered a multi-billion dollar domino effect that caused Tether (USDT) to briefly lose its stake.
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Earlier, US banking regulators had ordered bankrupt crypto firm Voyager Digital to stop making “false and misleading” claims about its customers’ funds being protected by the government.
In a letter sent to company executives, the regulator ordered the company to remove all misleading statements within two business days of receiving the letter.
The regulator added such action would not deter the agency from taking further action against the company in the future. The Federal Reserve and Federal Deposit Insurance Corp. (FDIC) sent a letter to the company on Thursday, July 28, 2022 stating they believe Voyager Digital has misled customers by claiming their funds and the company will be protected by the government.
Regulators said the company, which declared bankruptcy earlier this month, and its executives had made various statements indicating Voyager was insured by the FDIC.
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Customers who invest in cryptocurrency platforms will have their funds insured, and the FDIC will insure the customer’s funds, in the event of a Voyager failure.
“In reality, the company only has a deposit account at the Metropolitan Commercial Bank, and customers who invest through the company’s platform do not have FDIC insurance,” the regulator said, quoted by Channel News Asia, Friday (29/7/2022).
“Based on the information gathered to date, it appears that these representations are likely to be misleading and relied upon by customers who place their funds with Voyager and do not have direct access to their funds,” the regulators continued in a joint statement.
Voyager is one of several crypto companies struggling amidst the turmoil of the vast crypto market. In its Chapter 11 bankruptcy filing earlier this month, Voyager estimated it had more than 100,000 creditors and between $1 billion in assets and $10 billion in assets.
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Earlier, crypto lender ASVoyager Digital said on Wednesday, July 6, 2022, it had filed for bankruptcy, another victim of the price drop that has rocked the cryptocurrency sector.
Reporting from Channel News Asia, Thursday (7/7/2022), crypto lenders such as Voyager are thriving in the COVID-19 pandemic, attracting depositors with high interest rates and easy access to loans rarely offered by traditional banks.
However, the recent slump in the crypto market has hurt lenders leaving companies like Voyager Digital on the brink of collapse.
In Tuesday’s Chapter 11 bankruptcy filing, New Jersey-based but Toronto-listed Voyager estimated it had more than 100,000 creditors and somewhere between $1 billion and $10 billion in assets. , and liabilities of equal value.
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Chapter 11 is a bankruptcy procedure that holds all civil litigation issues and allows the company to prepare a turnaround plan while still operating.
In a message to customers on Twitter, Voyager Digital CEO Stephen Ehrlich said the process would protect assets and maximize value for all stakeholders, especially customers.
Australian Central Bank Governor Prefers Stablecoin Over CBDC. Voyager said Wednesday they have more than $110 million in cash and crypto assets. It intends to pay employees in the usual way and continue their primary benefits and certain customer programs without interruption.
Last week, Voyager said it had issued a default notice for Singapore-based crypto hedge fund Three Arrows Capital (3AC) for failing to make crypto loan payments totaling more than USD 650 million.
3AC later that week filed for chapter 15 bankruptcy, which allows foreign debtors to protect US assets, becoming one of the highest-profile investors to be hit by falling crypto prices. 3AC is currently being liquidated.
