The growth of stablecoins such as tether (USDT) and USD Coin (USDC) poses challenges to central banks because, despite their name, they often lack stability, Bank of Korea Governor Rhee Chang-yong said Friday, according to Yonhap News.
"This underscores the urgency for central banks to consider introducing central bank digital currencies (CBDC), whether retail or wholesale," Rhee said at the Digital Money: Navigating a Changing Financial Landscape conference. “Their widespread adoption could diminish the role of central bank money and impair the effectiveness of monetary policies.”
The ability of stablecoins, cryptocurrencies whose value is linked a fiat currency such as the dollar or euro, to hold their pegs, has been bought into focus this week. On Wednesday, ratings company S&P introduced a system for evaluating exactly that feature and rated tether, the largest stablecoin by market value, just one rank above the lowest in its five-point scale. None of the eight coins evaluated warranted top marks.
Rhee also said the Bank of Korea is working on a wholesale CBDC pilot and exploring its use in the tokenization of real-world assets, Yonhap reported. The bank has already said it plans a retail pilot scheme involving 100,000 people next year.
See also: Global Banking Regulator Wants Tougher Criteria for Giving Stablecoins Preferential Risk Treatment
Edited by Stephen Alpher.
