Banque de France Deputy Governor Denis Beau recently talked about the part cryptocurrency assets play in the world’s financial payment system. The official also listed three ways on how central banks can deal with digital currencies.
Beau was one of the speakers at the Official Monetary and Financial Institutions Forum held in London.
The head of France’s central bank said during the forum that the influx of technological innovations like blockchain can drastically change the traditional banking ecosystem.
Beau explained that the rise of crypto-assets and stablecoins could result in the development of new settlement assets. These new resources could potentially compete with or even replace central bank and commercial monies as the primary settlement assets in the middle of our payment systems.
While he acknowledged and listed the benefits digital assets could bring, Beau also claimed that stablecoins could present unexpected critical challenges. He said payment arrangements using crypto assets are exposed to various risks, including compliance, financial, legal, and operational.
Dangers That Should Be Addressed
The banker also mentioned that dangers like terrorist financing and money laundering, and the protection of investors and consumers should also be addressed. It will ensure they won’t end up being the weak links in our payment systems.
Beau said central banks have three options regarding cryptocurrencies. Traditional financial institutions could ignore these digital assets, ban them, or develop the appropriate regulations.
He broke down these options and implied the first option is impossible. Beau said that the risks mentioned above still need to be addressed even if crypto volumes are small and don’t appear to be harmful. The statement is particularly true for stablecoins as they are more vulnerable.
Beau pointed out that several countries have already opted for the second option, like China and Russia.
Lastly, Beau said the third option is the preferred response of France and other European countries. He said establishing regulations will enable countries to address risks and preserve the technological possibilities that crypto-assets offer.
The shortage of standardized procedures and regulations in the blockchain and cryptocurrency space is a known problem. And it’s a dilemma that both the major players in the industry and regulators are keenly aware.
Deloitte, a Big Four services company, had emphasized in its 2018 report that the absence of standardization was a significant hindrance to blockchain adoption.
Riccardo Spagni, the core developer of Monero (XMR), had also posited that different international regulatory standards could lead to an industry brain drain. He said crypto experts might transfer to more constructive jurisdictions.