Is Her Majesty’s Treasury bullish for stablecoins? If only it knew about all of Tether’s lawsuits! Baseless allegations, says Tether, of course.
Nevertheless, today HM Treasury put out a statement saying that “new technologies such as stablecoins – privately-issued digital currencies – could transform the way people store and exchange their money, making payments cheaper and faster.”
Dafuq is a stablecoin?
— Sophia Winson (@pigmaher) November 9, 2020
Private stablecoins—such as Tether, Circle- and Coinbase-backed USDC, and Gemini dollar—are a tricky business. Tether once claimed that its cryptocurrency, which maintains a one-to-one peg with the US dollar, was 100% backed by US dollar reserves. After some probing, it conceded that it was only 74% backed.
That, and more, are detailed in an ongoing investigation by the New York Attorney General, which also alleges that Tether’s sister company Bitfinex used the stablecoin company as a way to cover hundreds of millions of dollars in debt.
Aware of the difficulties that may arise from privately-issued stablecoins, Rishi Sunak, the Chancellor of the Exchequer, tweeted that the Treasury will “publish a consultation to ensure new privately-issued currencies, stablecoins, meet the high standards we expect of other payment methods.”
Sunak continued that this would “harness the potential benefits of stablecoins, whilst managing risks to consumers and financial stability.”
The Treasury noted that the Treasury and the Bank of England are still considering “whether and how central banks can issue their own digital currencies as a complement to cash.” These could compete with private stablecoins or help people transition to cashless societies.
Last month, the Bank of England’s governor, Andrew Bailey, told an audience at the Brookings Institute, “Stablecoins could offer some useful benefits.” Bailey said that stablecoins “could further reduce frictions in payments, by potentially increasing the speed and lowering the cost of payments (particularly if global stablecoins were to be established).”
Note the heavy reliance on the word “could” in all of this.