Stablecoins 'Pose Risk to Financial Stability' Warns Federal Reserve

Published on by Cointele | Published on

Stablecoins could "Complement" other payment systems and improve conditions for consumers, but need constant checks, says the United States Federal Reserve.

In its November 2019 Financial Stability Report released on Nov. 15, the Fed highlights stablecoins and their potential impact on the U.S. and beyond.

Fed: Unregulated stablecoins "Pose risks".

Rather than dismissing the phenomenon, officials eye potential use cases for the future but insist any stablecoin must adhere to regulatory demands.

"However, the possibility for a stablecoin payment network to quickly achieve global scale introduces important challenges and risks related to financial stability, monetary policy, safeguards against money laundering and terrorist financing, and consumer and investor protection."

It added rare official praise of Facebook's embattled Libra concept, describing it as an example of stablecoins, which "Have the potential to rapidly achieve widespread adoption."

"A global stablecoin network, if poorly designed and unregulated, could pose risks to financial stability," it states elsewhere.

The report comes as the Fed takes an increasing interest in digital currency.

At the same time, a former advisor to U.S. President Donald Trump revealed last month he plans to issue his own stablecoin, which is not fully backed by reserves.

U.S. lawmakers have sought to vet existing stablecoin offerings, notably market leader Tether, which currently faces a multibillion-dollar lawsuit that Bitcoin figures have broadly dismissed.

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