Bank of England chief says digital currencies could impact banks. The collapse of the UST, coupled with inflation, has caused concern among experts in the crypto community.
The executive director of markets at the Bank of England is of the opinion that digital currencies could have an impact on the balance sheets of central banks. Andrew Hauser delivered his speech at the Federal Reserve Bank of New York on June 1. According to the leader, digital currencies “systemic” central banks (CBDC) and stablecoins are capable of affecting the execution and control of monetary policy by the Bank of England and other central banks. In addition, he said that these digital assets can alter the assets and liabilities of financial institutions.
The Bank of England says digital currencies could influence the balance sheet.
In his speech, the Executive Director of Markets explained how the eventual design of CBDCs and stablecoins may affect the bank. According to him, the “possible design of any systemic digital currency” will influence the balance sheet of central banks. Furthermore, he suggested that the Bank of England start preparing for the possible implications of digital currencies. Andrew Hauser said the financial institution needs to start building defenses in their system against the implications. He added that digital currencies do not pose risks”redline” for central bank balance sheets.
Andrew Hauser also mentioned how digital currencies, in general, could affect the relationship between central and commercial banks. Central banks regulate a nation’s money supply by changing interest rates, regulating commercial banks, and acting as a lender of last resort. On the other hand, dial currencies can upset these functions. They can trigger competition for credit and reduce deposits in commercial banks. Similarly, CBDCs and stablecoins can prevent central banks from playing the role of lender of last resort.
In the wake of the UST crash, the executive also referred to regulating such a system to avoid another fiasco. He noted the Bank of England’s recommendation that stablecoins that reach systemic size must meet the standards required of a commercial bank. This includes full legal implications, transparency and strict central bank supervision. In this case, the stable currencies will be obligatorily integrated into the monetary system controlled by the central banks. Therefore, they will operate as a de facto form of state-guaranteed liability.
Crypto experts talk about the unsustainability of cryptocurrencies
The collapse of the UST, coupled with inflation, has raised concerns among experts in the crypto community. During the recent World Economic Forum (WEF) in Davos, many cryptocurrency experts expressed their position on crypto assets. Ripple CEO Brad Garlinghouse spoke about the unsustainability of cryptocurrencies. The CEO of the WEB 3 Foundation, Bertrand Perez, meanwhile, said that cryptocurrencies are in their boom phase, similar to when the internet began. He referred to scams that “brought no value” in the early days of the Internet.
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