Stablecoins, which are digital tokens that claim to be backed by fiat currencies or other assets, have been growing in popularity and adoption in recent years. However, a new report from the Bank of International Settlements (BIS) casts doubts on their ability to maintain their pegs consistently and reliably.
The report, titled “Stablecoins: risks, potential and regulation”, analyzes the performance of several major stablecoins during periods of market stress and volatility. It finds that some stablecoins exhibit significant deviations from their target values, especially when there is high demand for them or when their issuers face operational or regulatory challenges.
The report also warns that stablecoins pose a number of risks to financial stability, monetary policy and consumer protection. It argues that stablecoins need to be regulated and supervised in a comprehensive and consistent manner, both at the national and international levels. It also suggests that central bank digital currencies (CBDCs) could offer a more robust and efficient alternative to stablecoins, as they would be backed by the full faith and credit of the central bank.
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CBDCs are not a panacea for the problems of currency devaluation and inflation. They are a tool that can complement other policies and reforms to address the underlying causes of these phenomena. However, they can offer a viable solution for enhancing the efficiency, resilience, and competitiveness of national currencies in the digital age.
The report concludes that stablecoins are not a panacea for the challenges of cross-border payments and financial inclusion, and that they need to be carefully assessed and monitored by regulators and policymakers. It also calls for more research and experimentation on the potential benefits and risks of CBDCs and other forms of digital money.
Central Bank Digital Currency in face of Currency Devaluation and Inflation
The world is witnessing a surge in inflation and currency devaluation, especially in emerging markets and developing countries. The causes are manifold: the COVID-19 pandemic, supply chain disruptions, fiscal and monetary stimulus, geopolitical tensions, etc. These factors have eroded the purchasing power of many national currencies and raised doubts about their stability and credibility.
In this context, some central banks are exploring the possibility of issuing their own digital currencies, or CBDCs. A CBDC is a form of legal tender that is issued and controlled by the central bank but exists in digital form. Unlike cryptocurrencies, which are decentralized and operate on blockchain technology, CBDCs are centralized and can use different technologies.
The potential benefits of CBDCs are numerous. They can enhance financial inclusion, reduce transaction costs, increase transparency, improve monetary policy effectiveness, and foster innovation. They can also provide a safe and reliable alternative to cash, which is often scarce or costly in some countries. Moreover, they can help preserve the sovereignty and autonomy of national currencies in the face of global competition and digitalization.
However, CBDCs also pose significant challenges and risks. They can disrupt the existing financial system, affect the profitability and intermediation role of commercial banks, create cybersecurity and privacy issues, and raise legal and regulatory questions. They can also have unintended consequences on the macroeconomic stability and international monetary system, especially if they are used across borders or as a reserve currency.
Therefore, central banks need to carefully weigh the pros and cons of CBDCs before deciding to issue them. They need to design them in a way that maximizes their benefits while minimizing their risks. They also need to coordinate with other central banks and international organizations to ensure a harmonized and coherent approach to CBDCs.
SUI Crypto Partners Microsoft, NEAR foundation introduces Data Availability Solution
Sui, a cryptocurrency that aims to provide decentralized data storage and management, has seen a significant increase in its value in the past week. The coin surged by 12% on Wednesday, reaching a new high of $0.597. The main catalyst for this rally was the announcement of a partnership with Microsoft, the tech giant that has been investing heavily in blockchain and cloud computing.
According to the official press release, Microsoft will integrate Sui’s data platform into its Azure cloud service, allowing users to store and access their data securely and efficiently across multiple devices and locations. Sui’s platform uses a network of nodes that are rewarded with Sui tokens for providing storage space and bandwidth. This creates a peer-to-peer system that is more scalable, resilient and cost-effective than traditional centralized servers.
The partnership with Microsoft is a major milestone for Sui, as it validates its vision and technology, and exposes it to a wider audience of potential customers and investors. Sui’s founder and CEO, expressed his excitement and gratitude in a blog post:
“We are thrilled to join forces with Microsoft, one of the most innovative and influential companies in the world. This collaboration will enable us to bring our data platform to the next level and offer a better service to our users and partners. We are grateful for Microsoft’s trust and support, and we look forward to working together to create a more decentralized and democratic data economy.”
Sui’s price is expected to continue its upward trend, as more users and developers adopt its platform and benefit from its features. Sui is also planning to launch more products and services in the near future, such as a decentralized identity system, a data marketplace and a governance mechanism. Sui is one of the most promising projects in the crypto space, and it has the potential to revolutionize the way we store and manage our data.
Near foundation introduces data availability solution to ease Ethereum’s burden
Near Foundation, a leading blockchain platform that aims to enable a decentralized web, has announced a new data availability solution that could help ease the congestion and high fees on the Ethereum network. The solution, called Aurora Data Bridge, is a cross-chain bridge that allows Ethereum developers and users to access data stored on the Near Protocol, a scalable and low-cost layer-1 blockchain.
According to Near Foundation, the Aurora Data Bridge leverages the sharded architecture of Near Protocol to provide fast and cheap data availability for Ethereum applications. The bridge uses a novel proof-of-custody scheme that ensures the security and integrity of the data transferred between the two chains. The bridge also supports arbitrary data types, such as NFTs, ERC-20 tokens, and smart contract state.
The Aurora Data Bridge is part of the Aurora project, which is a full-stack platform that enables Ethereum applications to run seamlessly on Near Protocol. Aurora aims to offer a scalable and interoperable solution for the Ethereum ecosystem, without compromising on security or user experience. Aurora claims to be fully compatible with Ethereum’s tooling, standards, and contracts, as well as offering lower fees and faster transactions.
Near Foundation believes that the Aurora Data Bridge could help alleviate some of the challenges faced by Ethereum developers and users, such as network congestion, high gas fees, and limited scalability. By providing an alternative data availability layer, the bridge could enable more efficient and innovative use cases for Ethereum applications, such as decentralized exchanges, gaming, DeFi, and NFTs.
The Aurora Data Bridge is currently in beta testing and is expected to launch in Q1 2022. Near Foundation invites interested developers and users to join the Aurora Discord channel and sign up for the Aurora newsletter to stay updated on the project’s progress and features.