Is that Token, Legal Tender?
Here is our pick of the 3 most important Stablecoin news stories during the week.
The answer to this question is no, unless it is a CBDC. Libra, Bitcoin, Tether USD are all Tokens. You have a right to refuse them. Legal Tender means you can’t refuse a state backed currency, for a CBDC that is their “killer” advantage.
What is interesting, is that as of today, the only Central Bank that has the enabling legislation to support Legal tender is the People’s Bank of China or PBoC. So the other Central Banks will have to get it from their parliament’s and there’s the rub. Other Government Agencies will be eyeing their opportunity. The Tax Department would love a smart contract to deduct tax at source (as you make a payment VAT is automatically included and subtracted), Children’s welfare to direct what money can be spent on and what it can’t (no alcohol or gambling, lots of healthy vegetables and public transport) and so on across all the public key policy agencies and objectives.
The effect of even having this public debate could be to drive people back to Libra, Tether and Bitcoin as they have better privacy models, regardless of other real or perceived weaknesses.
China’s digital yuan, or DC/EP, is not just important from the perspective of geopolitics and its implications for the current underpinnings of the global financial system. What is arguably as significant is the technical design of this system – the first production-scale retail CBDC system in the world.
Sweden’s top central banker Stefan Ingves has gone all-in on sovereign digital currency, and on Thursday the Riksbank governor called upon the Swedish Parliament to do the same. “There shall be digital state money as legal tender, an e-krona, issued by the Riksbank,” Ingves wrote in a Thursday economic note that amounts to his strongest statement yet in favor of a Swedish central bank digital currency (CBDC). He pushed for Sweden’s government to “review the concept of legal tender” and the legality of an e-krona is necessary to prepare Riksbank for a digital future.
Tens of thousands of Chinese this week spent digital yuan at Walmart, gas stations and convenience stores across the southern tech hub of Shenzhen. The experiment — unprecedented in scope and size — went off without a hitch, catapulting the world’s No. 2 economy to the forefront of a race to develop virtual money.
So in summary, we see China making real progress in terms of an actual CBDC being implemented, while in the west we see Central Bankers trying to “frame the narrative” and preparing the ground for what could be a difficult time as Parliaments try to reconcile individual rights to privacy with other bigger state policy objectives. While the talking continues, will Libra launch and Tether continue its rapid growth in the meantime?
Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.
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