Stablecoin Policy Head from Coinbase Counters Banks' Concerns, Asserting that Cryptocurrencies Don't Pose a Danger to Traditional Deposits
The Bank of England is considering setting limits on the amount of systemic stablecoins individuals and companies can hold, as reported by The Financial Times on Monday. The proposed thresholds for individuals are as low as £10,000 ($13,600), and for businesses, about £10 million.
This move is driven by the Bank of England's concern about the potential impact of stablecoins on the financial industry. The U.K. government shares this concern, with stablecoins threatening an estimated $187 billion in annual swipe-fee revenue for traditional card networks and banks, according to Faryar Shirzad, the chief policy officer at Coinbase.
However, Faryar Shirzad has countered these concerns, stating that stablecoins do not pose a risk to the financial system. He compared the current pushback against stablecoins to earlier battles against ATMs and online banking.
Faryar Shirzad also debunked the central claim that stablecoins will cause a mass outflow of bank deposits. He argued that if deposits were really at risk, larger lenders would be competing harder for customer funds. He pointed out that trillions of dollars still hold at the Federal Reserve.
Despite the potential threats, Faryar Shirzad sees opportunities for institutions that adapt to stablecoin technology. Stablecoins could potentially cut settlement times, lower correspondent banking costs, and provide round-the-clock payments. They are primarily used as payment tools, not as long-term savings products, according to Faryar Shirzad.
Recent analysis shows no meaningful link between stablecoin adoption and deposit flight for community banks, as per Faryar Shirzad. He wrote in a Tuesday blog post that banks are crafting these claims to defend their revenues.
The Bank of England views the caps as necessary to prevent sudden deposit outflows that could weaken lending and financial stability. Major banks involved in related regulatory discussions include Barclays, Citigroup, and Bank of America, as part of broader cooperation talks with US counterparts.
However, the report did not specify any potential consequences for exceeding the proposed stablecoin holding limits. The total market cap of stablecoins is around $290 billion, as per data from CoinGecko.
In the UK, the debate over stablecoins continues, with the government and financial institutions weighing the potential benefits and risks of these digital assets. As the landscape evolves, it's clear that stablecoins offer faster and cheaper ways to move money, posing a significant challenge to traditional banking methods.
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