Circle urged the Fed to abandon the issue of the digital dollar
The issuer of the USDC stablecoin believes that CBDC can slow down the development of new technologies and negatively affect the private sector of stablecoins
26.05.2022 - 11:25
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What’s new? Circle, the issuer of the USDC stablecoin, has called on the US Federal Reserve System (Fed) to abandon issuing a central bank digital currency (CBDC). In its letter to the regulator, the company argues that the digital dollar will be detrimental to the private stablecoins sector, CoinDesk reports. Circle believes that its stablecoin USDC already provides “many of the potential benefits” of a future US government cryptocurrency.
What else did Circle say? Representatives of the USDC issuer noted that a host of companies, including Circle itself, use blockchain technologies “to support trillions of dollars of economic activity with fiat-referenced stablecoins.”
“The introduction of a central bank digital currency by the Federal Reserve could have a chilling effect on new innovations,” Circle stressed.
What happened before? The Fed noted the danger of stablecoins. The regulator believes that stablecoins, along with some money market funds (MMFs) and bonds, are risk areas in the current financial system, particularly in the field of funding. The Fed also noted the risk of problems converting stablecoins into fiat currency.
The Fed also began studying the advantages of the digital dollar. According to the Fed, CBDC could potentially provide ordinary citizens with a secure and liquid form of currency, and for legal entities, it would open a platform to create new financial products and services. The Fed explained that the digital dollar would not replace other forms of money, but would complement them.
At the end of May, Circle began publishing weekly reports on the USDC stablecoin reserves. This move is intended to increase USDC’s transparency operation amid the TerraUSD (UST) rate crash and problems with pegging other stablecoins to the US dollar. Circle claims that USDC is fully backed by cash and US Treasury bonds.
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