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Disagreement among Lords: A busy week for digital currency

Disagreement among Lords: A busy week for digital currency

We knew policymakers and financial leaders would be at their battle stations come 2022, and the updates rolling in across the crypto, CBDC and stablecoin fronts are coming thick and fast. We’ve rounded up the key updates from the private and public sector to make headlines this week:

On Monday, UK Parliament launched a cross-party group of MPs and Lords to cover the crypto and digital assets sector. The group is to act as a forum for parliamentarians, policymakers and the UK crypto sector to discuss policy and regulation in the industry.

The news followed last week’s announcement that the New York State Department of Financial Services appointed former Promontory executive Peter Marton as deputy superintendent of virtual currency. Marton commented that “Crypto supervision should be a marathon and not a sprint, and I look forward to continue this effort in earnest.”

Fed Chairman Jerome Powell also stoked excitement on Tuesday, stating that a highly anticipated report on cryptocurrencies and CBDCs will be released “within weeks” (though originally scheduled for a September 2021 release).

Powell made the statement during a Senate Committee hearing, where Senator Pat Toomey also questioned whether the Fed has authority to act as a retail bank for Americans, asking: “It seems to me that there is absolutely nothing in the history, the experience, the expertise, the capabilities of the Fed that lends the Fed to being a retail bank. Is that a fair observation?”
Powell responded: “I would say, yes.”

Having previously stated that a CBDC would render privately issued stablecoins to become obsolete, he also told Toomey during the hearing that it is possible the two could co-exist.

Powell’s comments were followed by news on Thursday that Congressman Tom Emmer has introduced a bill to prevent the Fed from issuing a CBDC directly to individuals. In a statement, Emmer commented that “Requiring users to open up an account at the Fed to access a US CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism.”

By Thursday back in the UK, a Committee of peers in the House of Lords concluded that there is no convincing case for the creation of a CBDC in the UK. The Economic Affairs Committee found that while a CBDC may provide some advantages, it could also present significant challenges for financial stability and the protection of privacy.

Lord Forsyth of Drumlean, Committee Chair, stated: “The introduction of a UK central bank digital currency would have far-reaching consequences for households, businesses, and the monetary system. We found the potential benefits of a digital pound, as set out by the Bank of England, to be overstated or achievable through less risky alternatives."

Don’t miss these updates:

This week also saw news that a consortium of five US banks, the USDF Consortium, would come together to launch a bank-minted alternative to non-bank-issued stablecoins. USDF will be minted exclusively by US banks and will be redeemable on a 1:1 basis for cash from a consortium member bank.

The Bank for International Settlements (BIS) in conjunction with the Swiss National Bank and SIX successfully tested the integration of wholesale CBDC settlement with core banking systems of five commercial banks.

Visa is partnering with blockchain firm ConsenSys to build a CBDC on-ramp to existing payment networks.

PayPal is exploring launching its own dollar-backed stablecoin. PayPal confirmed its investigation after a developer named Steve Moser found hidden code and images in the iPhone app.

Comments: (1)

Leonard Anderson
Leonard Anderson - Convex Foundation - Woking 14 January, 2022, 13:06Be the first to give this comment the thumbs up 0 likes

Tragically, it's no surprise.  Will it be another example of how the UK falls behind in adoption of DLT.  I'm sure Lord Holmes fully understands the issues and will fully support a low cost layer 1 solution.