Federal Reserve and Yale researchers craft regulatory framework for stablecoins

The Federal Reserve System and Yale University have collaborated to create a 49-page regulatory structure for stablecoins called “Taming Wildcat Stablecoins.” 

Jeffrey Zhang, one of the Board of Governors of the Federal Reserve and Yale Professor Gary B. Gorton, both lend their expertise to create a more stable future for stablecoins. 

Stablecoins have also been included in the Federal Reserves’ ongoing research about Central Bank Digital Currencies (CBDC).

The U.S.’ central banking system wants to know if stablecoins can ever be regulated to protect citizens from their potential risks. 

Stablecoins framework, a closer look

According to Zhang and Gorton, electronically produced currencies, like stablecoins, are not an effective medium of exchange, and these new asset classes pose a potential risk. 

The authors also added that lawmakers have two viable options to prevent the said risk from occurring: It’s either turn stablecoins into public money or create a CBDC. 

If ever a government would choose the first option, which is acknowledging stablecoins as public money, these cryptocurrencies should be issued through FDIC-insured banks first.

More discussions about stablecoins 

Starting July 19, U.S. Treasury Secretary Janet Yellen will begin the discussion with the President’s Working Group on Financial Markets to have a thorough discussion about stablecoins. 

The group includes top financial watchdogs which will craft the necessary policies in the regulation of stablecoins in the U.S. economy. 

Fed Chair Jerome Powell has also called for tighter measures on cryptocurrencies because of the high volatility that prevents them from being recognized as a stable and safe form of currency. 

The Fed Reserve is known to be more open to the concept of CBDC, but the U.S. hasn’t given any hints about creating a digital dollar. 

 

Image courtesy of Cointelegraph News/YouTube

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