Phillip Lowe, the governor of the Australian Central Bank, believes regulated private tokens could be better than Central Bank Digital Currencies (CBDCs). Speaking at the G20 event, he said private tokens must be backed by the state, and deposits into issuers like Circle must be regulated like bank deposits.
The Hong Kong Monetary Authority chief Eddie Yue highlighted that regulating private tokens is critical in addressing the risks posed by decentralized finance (DeFi). 90% of central banks globally, as per a Bank for International Settlements survey, were on the path to a central bank-issued digital currency. Some are in the research phase, some are in the pilot phase, and some have been rolled out for wholesale or retail use; the wholesale tokens are exchanged between banks and the consumers use retail tokens.
Lowe believes the private route is better than a CBDC but regulations have to keep up. He says the private sector is better at pioneering features for the tokens. The governor pointed out that setting up a CBDC would prove to be a costly affair for the central bank. Yue agreed that greater scrutiny of stablecoins could help prevent disasters, like the collapse of Terra’s algorithmic stablecoin, in the DeFi space. Stablecoins are often used to purchase other crypto tokens and are then used in DeFi activities. Yue believes it would be better to regulate stablecoins than the DeFi space. He says there may also be the need for essential technologies to keep an eye on for future innovation in the financial space.
