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The management of Circle, the issuer of the USDC stablecoin, believes that the launch of digital currencies of central banks will do more harm than good.
Many central banks are exploring the possibility of launching their own digital currency to remove the restrictions specific to fiat currencies when making international payments. The US Federal Reserve System (FRS) was no exception.
Recently, the regulator held public discussions related to the launch of the digital dollar. Circle management commented on the document, saying that the development of digital currencies of central banks does not make sense, since many of their advantages are already implemented in private stablecoins. The creation of state cryptocurrencies can “stifle” innovation and create a risk to financial stability.
“Central bank digital currencies, whether interest-bearing or not, could face quality and security issues that destabilize the two-tier banking system. From the Fed’s discussion paper on the digital dollar, it is not clear how it will prevent risks associated with financial stability, “says Circle management.
The company’s specialists explained that instead of increasing financial inclusion and reducing costs, the introduction of a digital dollar can lead to the opposite result. Due to rising inflation, public confidence in government and financial institutions is declining, so people who do not have access to banking services will be less inclined to interact with banks and use central bank products.
Recently, Fed Vice Chairman Lael Brainard called on the government to accelerate the launch of the digital dollar in order to keep up with other central banks in this matter and strengthen the position of the US state currency.
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