CFTE Co-Founder Tram Anh Nguyen moderated the OMFIF panel at Digital Money Summit 2024
London, 19th June 2024: The OMFIF Digital Money Summit 2024 recently hosted a thought-provoking panel moderated by Tram Anh CFTE’s co-founder of CFTE, as she discussed with an industry experts on the Future of Private Money managing stablecoins and tokenised deposit with Andrew Gallucci of Circle, Rodney Garratt from the Bank for International Settlements, and Timothy Massad from Harvard Kennedy School.
Tram Anh emphasises that private money and digital currencies are integral to the evolving financial landscape. According to her, the growth of digital assets and private monetary systems reflects a broader shift towards decentralisation and democratisation in finance. Tram Anh Nguyen believes that these developments can lead to a more inclusive financial system, provided that the industry ensures proper education and upskilling for individuals to adapt to these changes.
Understanding Stablecoins and Tokenised Deposits
Key Differences:
- Stablecoins: Digital bearer instruments designed to maintain a stable value by being backed by reserves. Transferred on decentralised blockchains, they pose unique regulatory and operational challenges.
- Tokenised Deposits: Digital representations of traditional bank deposits. They function within the banking system, are insured, and operate under a government-backed resolution framework. Unlike stablecoins, they are not bearer instruments.
Insights from Timothy Massad and Rodney Garratt:
- Tokenised Deposits: Should be treated like insured bank deposits with government-backed frameworks.
- Stablecoins: Non-bank instruments fully backed by assets, raising validation and resolution concerns. They introduce liquidity risks, as evidenced by the Silicon Valley Bank failure.
How can a payments ecosystem develop where both formats coexist?
- Multiple Payment Forms: Diverse methods can coexist.
- Rails as the challenge: The key question is choosing suitable payment channels (rails).
- Account-based vs. open models: Are bank-controlled “walled gardens” preferable to open models?
Is there a risk of fragmenting liquidity or creating inefficiencies with both formats coexisting?
- Stablecoins and sanctions: Despite adhering to sanctions lists, wallets can be transferred and cashed out in unsanctioned jurisdictions.
- Potential solutions: Monitoring and risk assessments aren’t viable. Upfront KYC approval for payments might be a way forward.
- Tether’s role: Regulatory frameworks could address convertibility and arbitrage concerns.
Wholesale CBDC and Cross-Border Payments
Future Considerations:
- Project Libra’s Impact: Initiated discussions on tokenised deposits and central bank settlement.
- US Challenges: Friction due to lack of a federal payments framework.
- EU’s Instant Payments: Raises questions about the future roles of stablecoins and tokenised deposits.
In conclusion, the panel at the OMFIF Digital Money Summit provided a comprehensive overview of the future landscape of private money. As stablecoins and tokenized deposits evolve, their distinct characteristics, regulatory requirements, and potential use cases will shape the future of digital finance.
