The latest report of the European Parliament: Crypto assets are not the same as CBDC. Global stablecoins will have a far-reaching impact (full text download)
Many central banks, including the People ’s Bank of China (PBoC), Bank of Canada, Bank of England, Bank of Japan, European Central Bank, Sveriges Riksbank and Swiss National Bank, are striving to issue their own digital currencies, while China is in a leading position.
A recent European Parliament report entitled " Crypto Assets: Major Developments, Regulatory Issues and Countermeasures " pointed out that the decline in cash usage in some countries has prompted the central bank to consider using central bank digital currency (CBDC).
However, the concept of CBDC may be contrary to the spirit of cryptocurrency, because CBDC will be centralized under the control of the central bank.
The report claims that CBDC and crypto assets are completely different, although the central bank and institutions' research on CBDC may be triggered by the emergence of crypto assets. The report writes,
"First, crypto assets are private assets, and CBDC is essentially a sovereign currency. Second, the issuance of crypto assets depends on the use of blockchain (or distributed ledger technology DLT) or similar technologies, and the issuance of CBDC does not depend on any particular The use of technology. Third, cryptocurrencies lack the status of legal currencies. "
The report further pointed out that the use of traceable public CBDC instead of anonymous and untraceable cash can completely prevent many money laundering and criminal activities. However, this may not be welcomed by the public, because the central bank and government authorities will have detailed information about each transaction.
Therefore, the main challenge for central banks is to design and implement CBDC to balance user integrity requirements and compliance with AML / CFT standards.
Another question highlighted in the report is "Can coins become a reliable payment method only after they are centralized?" An overall situation described by global regulators is that a sustainable payment system cannot be maintained without a central authority. Because if something goes wrong, the central government can take responsibility. On the other hand, the report pointed out that for the existence of a stablecoin with a known issuer, accountability has been introduced, although its payment is verified in a decentralized manner.
Stablecoins may have far-reaching effects
The report also pointed out that if improperly regulated, global stablecoins may have a profound impact on financial stability and monetary policy. As encrypted assets, they also bring various other risks, including money laundering and terrorist financing, consumer / investor protection and cyber security. The G20 finance minister and central bank governor recently issued a press release stating that the risks associated with the global stablecoin project need to be further evaluated and properly addressed before any global stablecoin project begins operations. The European Union Council and the European Commission can find the same information in a joint statement on stablecoins issued in December 2019.
Looking ahead, the EU should align its actions on the global stable currency project with the ongoing work of international standard-setting bodies such as the FSB, which should submit consultation reports on global stable currencies to the G20 finance ministers and central bank governors. Indeed, global stablecoins require not only a coordinated approach at the EU level, but also a coordinated global response with globally consistent regulatory standards. They should be based on reliable evidence and based on general principles. As the European Council and the European Commission correctly pointed out in their December 2019 statement on stablecoins, the next step is to better understand all crypto assets (not only (global) stablecoins) and establish evidence that they can serve The foundation serves as the basis for future EU legislation.