19th Parliamentary Intelligence-Security Forum – Risks and Rewards of Cryptocurrencies, Stablecoins and CBDCs

These four distinguished panelists presented to the Parliamentarian Intelligence-Security Forum on Cryptocurrencies, Stablecoins and Central Bank Digital Currency (CBDC).

First, they explained the basics about these forms of currency and the differences between the three. Cryptocurrency is essentially a digital or virtual currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently from a central bank. Stablecoins are a subset of cryptocurrency where the price is designed to be pegged to fiat currency or basket of currencies, or to exchange-traded commodities (such as gold or other precious metals). The phrase central central bank digital currency (CBDC) has been used to refer to the various proposals involving digital currency issued be a country or region’s central bank. Second, the panel discussed the risks and opportunities associated with cryptocurrency, stablecoins and CBDCs. On the risk side, the panel talked about cryptocurrency being use for money-laundering, terrorist financing and ransomware. They also touched upon potential volatility of crypto in the currency markets, the threat to fiat currency sovereignty (“dollarization”) and potential for disintermediation of the banking system. On on the other hand, the adoption of cryptocurrencies, including CBDCs, will likely increase financial inclusion, reduce payment costs (especially crossborder payments and foreign exchange), and is expected to enhance competition and innovation in the financial markets.

Third, the panel reviewed a number of regulatory and policy challenges around cryptocurrencies, noting that financial regulators typically have limited technical resources and recognizing that regulatory oversight of digital currency is often contested and subject to regulatory arbitrage. At the international level, they also mentioned that the World Bank, IMF and Bank for International Settlements (BIS) are playing low-key coordination roles. At the conclusion of the discussion, the panel also referenced how China is leading the development of its own digital currency which presents cause for concern as China will want to export its cryptocurrency to other developing countries in exchange for debt reduction or other economic benefits. Further, mass surveillance will be achieved at an astronomically higher rate. For example, the government will be able to see every transaction on the digital ledger so that they know if you are purchasing forbidden reading material, such as a pro-democracy newspaper or a Bible. This will only lead to greater mass surveillance and dominion