The collapse of VAT could bring the central banks closer to a CBDC

The collapse of VAT could bring the central banks closer to a CBDC

The continuing collapse of Terrausd could be the last impetus that central bankers need to think more seriously about the introduction of a digital central bank currency, some industry experts say.

According to Coingecko, VAT broke dramatically last week after a weekend deceit from its desired base price of 1 USD triggered a downward spiral to a low of USD 0.126 in the early Monday. The neighboring cryptocurrency of the token, Luna, fell from $ 86 last week to almost $ 0 at the time of publication.

Some industry representatives predict that the conversation could soon shift to the need for a reliable, state -managed CBDC.

"There is a demand for digital money, be it in the form of stable coins or in the form of an instrument issued by the central bank," said Jonathan Dharmapalan, CEO of Ecurrency, which provides technology for central banks for output and distribution CBDCs.

"The acceleration of our efforts for a really stable US dollar ... I think that's a conversation that needs to be put on the table."

The situation has accelerated the debate about stablecoin policy and regulation in the United States. US Finance Minister Janet Yellen has doubled her request to the congress of creating a guideline about who can issue stable coins.

"A lot has been talked about the stable coin regulation and we have not yet landed on what law will be," said Dharmapalan. "When it becomes law, who regulates stablecoins? Is it the people who regulate banks, will it be people who regulate securities? There is a debate about which entity a regulatory authority will be for stable coins."

The legislators on the hill have signaled the need for a better understanding of what a CBDC could look like in the USA, Kristin Smith, Managing Director of Blockchain association .

"I think [The Ust situation] is certainly a factor that will flow into future debates about CBDCs, but I still think that the challenge at CBDCs is that there are still many questions about what the design could look like," said Smith. "Then it is just the question of how long it would take for a decision to be made and the technology is used."

The Ministry of Finance will "shortly" issue a "comprehensive report" about cryptocurrencies and stablecoins, Yellen said last week as part of a request from the President’s Working Group on Financial Markets (PWG). She also emphasized that the congress should also work on StableCoin legislation and said that it was "extremely reasonable" that this was done by the end of 2022. Nevertheless, a concrete policy is probably still a long way, said Smith.

"I still think that this will take many, many years, and I think that we will have a very sophisticated stable coin market until then," said Smith.

"Our financial services system will look significantly different than today, and therefore the need for a system at the time we reach this time may not be so acute."

In addition, other industry experts said that a CBDC is not interchangeable with a stable coin and the two types of digital currency play different roles.

"The main advantage of stablecoins is the large reach, the user base and the solid reputation of traditional financial institutions," said Anton Chashchin, managing partner of Bitfrost.io. " I believe that algorithmic StableCoins does not have to be included in the CBDC system. Significant risks are addressed that have to be solved. ”

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The mail collapse of the VAT could drive the central banks closer to a CBDC.