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Stablecoin Policy Interest Remains Hot as Finance Bigwigs Dish on CBDCs

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  • Financial experts are setting their sights on the stablecoin industry this week with more talk about the future of central bank digital currencies (CBDCs)
  • As several governments roll out CBDC trials, the Federal Reserve and European Central Bank (ECB) are discussing options
  • These comments come just after the meltdown of algorithmic stablecoin TerraUSD (UST-USD)

Crypto prices might not be doing so hot, but crypto policy talk is certainly on fire right now. Prominent financial players have been commenting on the market in recent days, especially the stablecoin asset class. As more governments opt to regulate crypto, there has also been talk about whether CBDCs are a worthy pursuit. From the sounds of it, some think highly of the idea.

Of course, it’s hard to oppose CBDCs after the recent rampant volatility in the stablecoin industry. This month, Terra’s $1-pegged stablecoin was thrown into the spotlight when it crashed and burned to today’s 5 cent price point. Up until then, stablecoins had been considered some of the safest bets in DeFi.

In the aftermath of the crash, many have come to reject crypto altogether. So, it makes sense that people are speaking up in support of stablecoins from controlled, centralized entities. These banks can ensure their currencies are collateralized and secure from volatility in a way that other stablecoin projects cannot.

Stablecoin Talks Continue as Finance Experts and Policymakers Look to CBDCs

Financial policy has been a major talking point this week in particular, with thousands of prominent industry players in Davos, Switzerland for the World Economic Forum’s 2022 meeting. Both in Davos and abroad, talk is turning to crypto and stablecoins.

ECB president Christine Lagarde has perhaps stoked the most ire from crypto faithfuls this week. Recently, Lagarde said digital assets are flat-out worthless and “based on nothing.”  Now, she is doubling down; she said that, while her son does invest in the space, his investments have convinced her to stay out of crypto entirely. Despite this bearishness, though, Lagarde did voice support for a Euro CBDC. “The day when we have the central bank digital currency, any digital euro, I will guarantee it,” she said. Lagarde added that CBDCs are “vastly different” from other cryptos.

Meanwhile, Federal Reserve Vice Chair Lael Brainard has also talked about CBDCs this week — and she sounds optimistic. On Thursday morning, Brainard spoke to the House Financial Services Committee about the potential for a U.S. digital dollar. She believes CBDCs can “coexist with and be complementary to stablecoins and commercial bank money.”

This comes at a time when plenty of other governments are pursuing their own CBDC ventures with gusto. As the ECB and Fed continue to speculate about their own stablecoin ventures, the Brazilian central bank is partnering up with Stellar Partners to develop its own CBDC. Norway is making its way into the space as well, using an Ethereum (ETH-USD) layer-2 network to test its own digital currency.

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