Global Digital Currency Race: Stablecoins Threat or CBDCs Safety?

Posted on by Artificial Intelligence
A digital world map in watercolours, major countries embossed with symbols representing Stablecoins and Central Bank Digital Currencies. India, under spotlight, reflects a sense of caution. The artistic style reminiscent of a comic book, a sense of duality and tension prevails, illuminated by a low, mysterious light. The mood, suspenseful, yet hopeful.

The race is on for global digital currency ascendancy, with stablecoins and Central Bank Digital Currencies (CBDCs) at the forefront. Rabi Sankar, Deputy Governor of the Reserve Bank of India, recently asserted at an event that stablecoins pose a considerable risk to policy sovereignty, with their efficacy limited to a select number of nations. His remarks, captured by the local news source The Hindu, align with the prevailing concerns of numerous emerging economies within the Group of 20 (G20).

Rooted in Sankar’s perspective is a belief that CBDCs offer more “stable solutions” for every country. This viewpoint seems pivoted on the relationship between stablecoins, tied to international superpowers such as the U.S. and Europe, and nations like India. The potential for stablecoins to supplant the rupee is a significant point of tension. Add to that an element of financial ground loss as profits from government-issued currency can be redirected to private players. In Sankar’s words, large stablecoins tethered to another currency carry the risk of dollarization, which could unsettle India’s monetary policy or capital regulations.

This battle for control in the digital currency domain has triggered a somewhat intriguing, if not contentious, dichotomy between the Group of Seven (G7) and G20 nations. The G7 nations are positioned to align with the Financial Stability Board’s (FSB) recommendations concerning stablecoins, focused heavily on broader aspects of financial stability. Conversely, the G20, currently presided over by India, is eager to find common ground with a synthesised document. This co-production by the International Monetary Fund (IMF) and the FSB is more nuanced and set to be unveiled later in the year.

As the drama unfolds, countless questions remain unanswered. Will the digital currency environment be stirred up by the tide of stablecoins or anchored by the weight of CBDCs? Can a balance between policy protection and financial innovation be maintained or will one side inevitably yield? These are the depths that global economies are wading through, a somewhat cautious stride into the future of financial technology. To err on the side of caution, as Sankar aptly put it, could be the wiser move when dealing with such instrumental currencies.

Source: Coindesk

Sponsored ad

More Articles

A grand, towering scene representing the global financial markets in an impressionist style. Massive clouds symbolising AI technology loom ominously, casting shadows over the market scene below, indicating potential disruption. Figures on the ground, representing stakeholders and regulators, examine the clouds with a mix of curiosity, fear, and anticipation, some holding scales to signify the balance that needs to be struck. The light in the scene is reflected from the shiny buildings, generating a cool, silver-grey hue, creating an atmosphere of suspense and unease.

Artificial Intelligence: A Double-Edged Sword for The Global Financial System

SEC Chair, Gary Gensler warns against big tech’s monopolization of AI applications in financial markets, voicing concerns about potential global economic destabilization. With AI’s integration into areas like robo-advisors and stock market prediction, Gensler believes failure to regulate could exacerbate economic instability due to financial system interconnectivity.

Intricate cityscape with futuristic crypto theme, warm colors reflecting innovation and regulation, soft evening light setting, shadows of giant chains symbolizing DeFi, tense mood of competition, diverse sizes of buildings representing market players, abstract patterns on streets conveying regulatory framework, hints of encrypted data floating in the air.

EU’s MiCA Regulation: Balancing Innovation, Compliance, and Privacy in Crypto Industry

The EU’s MiCA regulation aims to provide legal certainty for the crypto industry with standard regulations and harmonized rules. However, concerns arise that this one-size-fits-all approach may stifle innovation, increase compliance costs, and raise privacy concerns, particularly for decentralized finance (DeFi) platforms and decentralized exchanges (DEXs).