The Federal Reserve’s Community Depository Institutions Advisory Council (CDIAC) suggested regulatory measures to address the risks posed by stablecoins issued by non-bank institutions, according to records from an April 10 meeting revealed by PANews.
CDIAC raised concerns that stablecoins could encourage people to pull their money out of traditional bank accounts, therefore, the committee recommended bringing stablecoins under existing financial regulations to prevent this kind of disruption.
The chairman of the U.S. Federal Reserve said: “Stablecoins hold significant appeal, but we must prioritize appropriate regulation to ensure the stability of our financial systems.”
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Unlike traditional banks, stablecoin issuers are not always subject to the same liquidity requirements, which could pressure banks to reduce their credit offerings. Regulators are now working to establish consistent rules to prevent regulatory gaps and financial arbitrage.
As stablecoins continue to evolve, the question remains: can innovation and financial stability move forward together or will one eventually come at the cost of the other?
