The International Monetary Fund (IMF) published a new staff paper on September 19, saying stablecoins can cause significant disruptions to the current global payments framework. However, the organization also admits that this type of cryptocurrencies can contribute to improving financial inclusion across the world.
Disintermediation of the Finance Sector
According to a recent post on the IMFBlog, stablecoins pose a number of risks to global finance, one of which is the disintermediation of the finance sector. Banks will be the first to be affected, as stablecoin issuers provide users with direct access to local and international payment options.
However, banks can attempt to hold on to their status as gatekeepers by creating their own digital currency innovations. European regulators have in recent times spoken highly of central bank digital currencies (CBDC) as being better than privately-issued stablecoins.
Since the release of the whitepaper for Libra — Facebook’s crypto project, there has been a resurgence in the talk of government-issued digital coins. Recently, Thomas Jordan talked up the potential of state-issued fiat-pegged currencies, saying they could be used as substitutes for fiat.
Capital Control Conundrum
Another probable risk identified by the IMFBlog comes in the form of capital control palaver for governments. Tech companies like Facebook with 2.4 billion users can leverage their networks to compete with global currencies like the U.S. dollar.
This past week, authorities in France and Germany have called Libra a threat to the monetary sovereignty of nations. Policymakers in Beijing have gone even further, raising questions over the potential “dollarization” risk posed by Libra.
Chinese authorities purportedly fear that widespread Libra adoption in China could lead to further devaluation of the yuan.
Conduit for Money Laundering
There is also the fear that stablecoins may become a conduit for money laundering and other illegal financial activities. To be fair, this particular rhetoric is one that regulators regularly call upon when criticizing cryptocurrencies as a whole.
The Libra Association has been holding a series of meetings with central banks and financial watchdogs over the issue of money laundering. The Swiss Financial Market Supervisory Authority (FINMA) has said it will enforce robust anti-money laundering (AML) protocols on the project.
FATF (Financial Action Task Force) — the intergovernmental AML body, has made combating money laundering via cryptos one of its focus points for 2019. Crypto businesses in FATF member states have begun to take steps to comply with guidelines set forth by the task force.
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