According to a tweet by John Reed Stark, government stablecoins not only pose risks to the stability of the international financial system, but also open a Pandora’s box of privacy and cybersecurity concerns. Stark backed Senator Ted Cruz, who introduced a bill in March that would bar the US Federal Reserve from launching a digital dollar.
“As in the case of cryptocurrencies and stablecoins, you need to start by answering the question: what problem are CBDCs actually solving, and why do we need them? There is no answer to this question,” Stark wrote.
The former SEC official believes that existing digital currencies already work very well and are trusted. They are regulated by government agencies and administered by financial institutions insured by the US Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), Stark added.
At the same time, a former SEC representative criticized politicians and legislators who speak out in support of cryptocurrency innovation. He cited as an example statements by crypto enthusiasts who claim that there are the same risks for banks as for cryptocurrencies, and citing the recent collapse of Signature, SVB and Republic banks. However, banks are highly regulated, and crypto companies lack insurance and proper oversight from regulators, Stark noted.
“The lack of consumer protection, inspections, audits, licensing, mandatory cybersecurity standards, fiduciaries, separation of client assets from exchange assets, rules against insider trading or market manipulation all make the crypto ecosystem dangerous and prone to fraud,” added Stark.
According to him, the risks of transactions with US-registered financial institutions pale in comparison to the risks of transactions that use stablecoins such as USDT. Anyway, banks, brokerage houses and credit card issuers can offer compensation in case of fraud, negligence or even a simple mistake, unlike cryptocurrency platforms.
Recall that in May, Stark called Tether, which issues USDT, a giant house of cards. The distrust of the ex-official in the company is caused by the lack of a legal framework regulating the activities of stablecoin issuers.
Source: Bits
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