The Bank for International Settlements (BIS) is prioritizing a focus on stablecoins and central bank digital currencies (CBDCs) in its upcoming efforts.
BIS is experimenting with stablecoins and CBDC
Pyxtrial, a subsidiary project of International Settlements (BIS) is being established to improve monitoring of stablecoin balance sheets.
The London Innovation Center is leading the initiative to explore various technology options that could help supervisors and regulators create integrated data-driven policy.
The BIS is also continuing to trial retail CBDCs for cheaper cross-border payments and currencies using automated market makers and CBDCs. The organization is also dedicated to researching tools that can monitor financial markets in real time, including cryptocurrencies and decentralized finance.
The Eurosystem Centre, hosted by the European Central Bank, the Bundesbank and the Bank of France, is ready and will collaborate with all central banks in the euro area. CBDCs and advancements in payment systems remain a crucial area of exploration, with 15 out of 26 active projects focusing on the same in recent years.
The importance of stablecoin reserves
Stablecoins are cryptocurrencies pegged to typically stable assets, such as fiat currencies like the US dollar.
To maintain this peg, the stablecoin issuer must hold reserves equal to or greater in value than the tokens it has issued and offer constant convertibility of the dollar through those reserves. Top examples of stablecoins include Tether (USDT), Binance’s BUSD, and Circle’s USDC.
Ensuring the matching of fiat reserves with circulating stablecoin tokens is extremely important and has been a contentious issue in the cryptocurrency industry at times.
The fact that Tether does not provide third-party audit results has led many to question whether USDT is fully backed by fiat currencies and has led to the growth in popularity of USDC. Circle provides monthly third party audit results.
Stablecoins continue to drive interest in legacy financial institutions
Stablecoins have recently come into the spotlight in the cryptosphere, with multiple financial institutions exploring the concept and looking to integrate these digital assets. Visa, for example, is looking to incorporate stablecoin agreements into its cryptocurrency strategy.
The credit card giant strives to offer its customers the ability to switch between digital assets and conventional currencies through its platform.
Cuy Sheffield, the head of Visa’s crypto department, revealed the company’s goals for stablecoins during the recent StarkWare Sessions 2023. Considering that USDT settlement volume surpassed both Visa and Mastercard in 2022, it’s clear see why the company would show interest in these digital resources.
