Global central banks face a dilemma over whether to embrace stablecoins or promote alternatives to the new technology, as the US’s aggressive backing of privately issued tokens thrusts the fast-growing sector into the financial mainstream.
This week, politicians in Washington are advancing legislation to ban the Federal Reserve from issuing a digital currency and provide a regulatory framework for privately issued stablecoins. For the Trump administration, such tokens, which are mostly backed by dollar assets, offer a vehicle to project the strength of the greenback globally.
But the Bank for International Settlements, the umbrella body for central banks, last month warned that the unchecked rise of stablecoins could threaten the public’s trust in money, imperil monetary sovereignty, and potentially pose risks to financial stability. Policymakers are also wary that these tokens can act as conduits for crime.