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Banks should be ready with CBDCs if Libra is blocked: BoC exec

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According to an Oct. 15 report from The Canadian Press, Timothy Lane, deputy governor of the Bank of Canada, or BoC, said central banks should have their own digital currency ready should regulators block Facebook’s Libra token. He also noted that such an asset is important as a possible solution for the economic realities of COVID-19.

Lane spoke at an online panel discussion hosted by the Central Bank Payments Conference, stating that the Bank of Canada has been developing a central bank digital currency, or CBDC, at “a good pace.” He said the bank would need to hold consultations regarding what Canadians expected from a digital currency, but added Facebook’s efforts introducing Libra could help improve cross-border payments.  He additionally noted that it could help unbanked and underbanked people become part of the global economy.

“That’s the nub of the question: whether the answer is Libra or whether it’s something that central banks do,” said Lane. “If we’re saying, well, it should be [a CBDC and] not Libra, then we have to have something ready so that if a decision were taken that central bank digital currency is the way to go, we would actually be ready to launch it.”

The deputy governor’s comments are a change from those in pre-pandemic February, when he declared that there was “not a compelling case” for the bank to create a CBDC. Canada’s central bank also recently released a report calling CBDCs “risky,” given the competition among crypto exchanges and banks, and how the digital currency is used for transactions.

Global regulators including the G20’s financial watchdog, the Financial Stability Board, or FSB, recently published regulatory recommendations opposing global stablecoins like Libra. The group stated such stablecoins could become “systemically important” across jurisdictions, undermining the capacity for governments to dictate monetary and investment policy within their borders.

Cointelegraph reported on Oct. 12 that seven members of the G20 representing the world’s largest economies said they would initially oppose the launch of global stablecoin projects — which would include Libra — pending appropriate regulatory oversight. The group of seven has raised concerns over how to ensure digital assets comply with anti-money laundering laws, consumer protection rules, and other regulatory matters.

“The progression here is not to disrupt the system or compete with it, but really to augment consumers payment optionality and to complete the system,” said the Libra Association’s policy director Julien Le Goc in the same online panel as Lane.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.