LONDON, June 24 (Reuters) – The International Bank for Reconciliation has issued its toughest warning about the risks posed by the stupidity, urging countries to move rapidly towards tokenizing their currency.
Often called central banks, BIS outlined concerns, including the possibility of undermining financial sovereignty, issues of transparency, and the risks of capital flight from emerging economies.
Less than a week after the US Senate passed the bill, it created a regulatory framework for the stubcoin imposed by US Doler.
Stablecoins are a kind of cryptocurrency designed to maintain a constant value. Usually a 1:1 dollar peg backed by actual assets such as the US Treasury and gold.
Coins covered in dollars currently account for 99% of the market. It is estimated that more than $260 billion in coins are in circulation.
“Absurd things as a form of sound money are lacking, and without regulations pose risks to financial stability and financial sovereignty,” BIS said in an early release chapter of its annual report, which is due to be released on Sunday.
Biss’ economic adviser Hyun Sung Shin explained that Stubcoin lacks the traditional settlement function that central banks offer with Fiat Money.
He compared them to private banknotes circulating during the 19th century free banking era in the United States. This means that you can often trade at different exchange rates depending on the issuer, which undermines the principle of not having a central bank issued money question.
“Singleness is either you have it or not,” Singh said. It also warned of the risk of “fire sales” of assets that support Stablecoins if they collapse, as did Terrausd (UST) and cryptocurrency, as did Luna in 2022.
There are also concerns about who will control Stablecoins. Tether currently has more than half of the overall Stablecoin market, but will leave the EU following the introduction of new rules that require Stablecoin operators to be licensed by blocks.
“The overall issue with disclosure, this is where some stubcoins are different,” said Andrea Maechler, Associate General Manager at BIS. “You’re always wondering about the quality of your assets support. Is the money really there? Where is it?”
Bold action
The BIS hopes that central banks will descend the route of a tokenized “unified ledger” that incorporates central bank reserves, commercial bank deposits and government bonds.
That means that central bank money remains both a major vehicle for global payments, and that global currencies and bonds can be effectively integrated into the same “programmable platform.”
Tokenisation aims to create a digitized central bank system that solves payments and securities transactions almost instantly and cheaply, by reducing the need for specific, time-consuming checks and unlocking new features.
It also makes the system more transparent, resilient and interoperable, protecting it from some of the more unpredictable elements of cryptocurrency.
There are several important issues to overcome, including who sets rules to manage the platform.
“It takes bold action to reach the full potential of the system,” says Agustin Carstens, the boring head of BIS.
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