The industry welcomed President Biden’s Executive Order on digital assets for many reasons. First, it acknowledged that blockchain technology and its promise were no longer a matter of “if” but “when.” But surprisingly, since that recognition, the discussion has quickly progressed into debates of “this or that,” creating a real risk of losing sight of the promise of inclusion through blockchain built on the principles of co-existence and interoperability.
Now is the time to refocus the conversation on how this technology can benefit those left behind because it has the potential to improve the current financial system and create new opportunities, but only if we are open to exploring all its possibilities.
To that end, our comments in response to the Treasury’s request for comment on Ensuring Responsible Development of Digital Assets focused on three key points:
Central Bank Digital Currencies (CBDCs), dollar-denominated stablecoins, and other digital assets and cryptocurrencies currently co-exist and will continue to do so.
“The co-existence of various types of digital assets should inform the policy framework and formal regulations developed by the Department of Treasury — and the broader inter-agency community — and should acknowledge the importance of interoperability. This is particularly apparent in the context of CBDCs and stablecoins, which are likely to overlap. The ongoing adoption and regulation of stablecoins will necessarily inform that of CBDCs -- and vice versa.”
“...assuming that either only CBDCs or only stablecoins will exist in the years ahead – and that all other digital assets will disappear – is not only unrealistic, but also may lead to unwieldy and ill-fitting policy outcomes.”
“...SDF continues to believe that it is imperative that the United States have a clear, strong stance regarding stablecoins, which already are widely distributed in the marketplace – and CBDCs – as numerous other countries are at various stages of exploring and launching them. This could also offer a way for the United States to take a leadership position with respect to standard setting and interoperability – while maintaining the dollar as the global reserve currency.”
While there is no one solution for financial inclusion, public and private sector collaboration and individual products and services are critical to moving toward that goal [or making progress].
“No singular technology – whether blockchain-enabled or not – will be a panacea. For SDF, this context is important, since systemic change vis-à-vis financial inclusion may require long-term investment, but individual products and services can help improve things along the way.”
“...the private sector can and does play a useful role in addressing financial inclusion, particularly by reducing transaction fees, increasing speed, and expanding the availability of affordable consumer applications and financial services. Increasing payment speed, for one, can help reduce late payments and overdraft fees -- which currently cost American consumers over $30 billion a year.
“MoneyGram’s innovative use of the Stellar network further illuminates the potential for traditional financial companies to leverage blockchain technology and digital assets to improve financial inclusion.”
“SDF believes and has observed first-hand that well-designed public infrastructure can help address financial inclusion.” “Specifically, “[t]he development of a CBDC could support financial inclusion through the design of low-cost solutions for consumers and [Micro, Small, and Medium-sized Enterprises] MSMEs, specifically merchants accepting payments. A CBDC issued on the appropriate infrastructure could lead to the development of a real-time payments system, allowing for transactions to settle and finalize in seconds.” Moreover, a “CBDC built using blockchain would reduce merchants' acceptance costs due to the efficiency to move value and the removal of intermediaries required to process a transaction.”
More, regularly collected data on digital asset usage by the federal government will enhance policymaking.
“SDF respectfully encourages the Treasury Department, in concert with the Federal Reserve, Federal Deposit Insurance Commission, and potentially the Federal Financial Institutions Examination Council, to begin collecting regular data about consumer usage and preferences regarding digital assets, including through surveys, focus groups, and/or case studies.”
“More granular data that is regularly collected in a methodologically rigorous manner could be useful for policymakers in the years ahead, particularly with respect to financial inclusion and tracking longitudinal trends in under-served communities.”
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