- Martin Gruenberg recognizes the value of stablecoins in facilitating commercial and retail payments.
- Yet he remains skeptical that their benefits can exceed those offered by the FedNow system.
The interim chairman of the Federal Deposit Insurance Corporation of the United States (FDIC), Martin Gruenberg, considers that any initiative related to the development of a payment stablecoin system must be designed in order to serve as a complement to the FedNow system of the Federal Reserve and the digital dollar under study.
During a talk offered at the Brookings Institution in Washington, the senior official presented a series of considerations about the ideal functioning of stable currencies within the US financial system if the banks plan to get involved with the trading and use of cryptocurrencies.
Despite his skepticism about the value of digital assets, Gruenberg acknowledged that, unlike Bitcoin or Ether, most stablecoins in circulation today are backed by other assets such as fiat currencies, US Treasury bonds, or commercial paper.
However, he said stablecoins have so far failed to prove “their value in terms of the broader payments system.” He further noted that their use has been limited to serving as instruments for the purchase – sale of digital assets with commercial and investment fines in substitution of fiduciary money.
“Even if crypto–assets and stablecoins have not yet proven to be a meaningful or reliable source of payments in the real economy, the distributed ledger technology upon which they are built may prove to have meaningful applications and public utility within the payments system”, Gruenberg noted.
For the official, the main benefit offered by payment stablecoins is their ability to facilitate commercial and retail payments immediately and permanently. But compare such benefits to those proposed by the FedNow system that the Federal Reserve will launch in 2023.
The FDIC acting chief’s comments were picked up in a Tweet by influential financial services reporter Brendan Pedersen.
“Gruenberg seems skeptical that the benefits of payment stablecoins outweigh the launch of FedNow, a real-time payment system that we expect the government to launch in the spring.” Although he highlighted Gruenberg's consideration that stablecoins have "merit" to be studied.
On the Flipside
- For Gruenberg, the importance of a stable payment system in the US will depend exclusively on its complementarity with the FedNow system and the digital dollar or CBDC, which the central bank may issue in the coming years.
Why You Should Care
- The FDIC is collecting information related to cryptocurrency trading to help you better understand how it works and to provide guidance to banks and their customers on how to use this type of digital asset.
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