Ripple stayed with the SEC whereas American bankers warn the Senate of the digital greenback
The ABA didn’t reveal any names, but appears to be pointing a finger at the many distributed ledger technology companies that offer their services for developing CBDCs.
The American Bankers Association has warned lawmakers of real tradeoffs that could significantly transform the banking system in a world of CBDCs.
The defensive stance comes in a year the Eastern Caribbean already went live with its own CBDC. and many countries have announced development programs for their sovereign digital currencies. Brazil last week announced the guidelines for the possible development of a CBDC following the creation of a working group in 2020.
Today El Salvador approved Bitcoin as legal tender. While it’s not a CBDC, this move is certainly revolutionary. And if the ABA is concerned about the risks the CBDC poses to consumers and the financial system, approving Bitcoin as legal tender is likely to be problematic for the association, especially if other countries follow El Salvador’s lead.
In a statement for record at a hearing of the Senate Banking Subcommittee, the Banking Trade Panel said that choosing between the various CBDC designs requires “serious and complex policy compromises” and that too often CBDC proponents use a “highlight reel” approach to describing Track CBDC. “To pluck all the supposed benefits while downplaying the serious risks to consumers and our financial system.”
The ABA didn’t reveal any names, but appears to be pointing a finger at the many distributed ledger technology companies that offer their services for developing CBDCs. These include Corda, Ethereum, Stellar, Hedera, eftpos from R3 and the private version of the XRP ledger from Ripple.
“Given the added complexity, delay, and transition costs associated with creating a new form of money, there are strong efficiency concerns that suggest that CBDC should only be pursued as a last resort in order to achieve well-defined policy goals that are not achieved by Payments can be achieved. ”Innovations that leverage existing digital dollars.
“To date, these use cases have not yet emerged. As a viable future use case for CBDC emerges in the United States, design decisions must be carefully considered to ensure that the benefits and risks of adopting a CBDC are fully understood, ”the association said.
While the ABA does not see a practical application for a digital dollar, the European Central Bank is aiming for a digital euro within the next five years. Panetta from the ECB has proposed a plan that limits the wallet of every citizen to 3,000 euros.
One of the strongest competitors for the development of the digital euro is Ripple, which seems to be a favorite in the eyes of France.
The whole world is watching what the United States will do about a digital dollar. In May, Federal Reserve Chairman Jerome Powell spoke about the work of the Central Bank:
“The effective functioning of our economy requires that people not only trust the dollar, but also the payment networks, banks and other payment service providers that make money flow every day.
“Our focus is on ensuring a secure and efficient payment system that delivers broad benefits to American households and businesses while innovating,” he said, adding that the Fed plans to have prototypes by July.
Ripple Labs is most likely aiming for a deal with the Fed to use XRP in the system. However, the company is somewhat stuck in a lawsuit with the SEC that could hurt the company’s vigor among central banks.
And while Brad Garlinghouse’s company keeps winning new customers, competitors are gaining ground. This week a group of banks started testing a new FX swap platform developed by Finteum and operated by R3 and Fnality – also known as “XRP Killer”.
The SEC and Ripple could soon reach a settlement agreement that should allow the company to continue its IPO plans. However, the regulator appears to be employing tactics to contain the case, including failing to hand over internal documents on the cryptocurrencies BTC, ETH and Ripple’s XRP. If the SEC remains uncooperative, the judge can order fines.
FinanceFeeds recently addressed attorney Jeremy Hogan’s view of what the settlement would look like. One of the terms could be hindering the flow of XRP.