Ripple stuck with SEC as American Bankers go against CBDCs
The ABA named no names but seems to be pointing fingers at the many distributed ledger technology firms that are offering their services to develop CBDCs.
The American Bankers Association has warned lawmakers about real-world trade-offs that could significantly reshape the banking system in a world of CBDCs.
The defensive stance comes in a year that already saw the Eastern Caribbean going live with its own CBDC. and many countries have announced development programs for their sovereign digital currencies. Last week, Brazil announced the guidelines for the potential development of a CBDC after launching a working group in 2020.
Today, El Salvador approved Bitcoin as legal tender. Although not a CBDC, this move is certainly a revolutionary one. And if the ABA is worried about CBDC’s risks to consumers and financial system, approving Bitcoin as legal tender is probably troublesome for the association, especially if other countries follow El Salvador’s lead.
In a statement for the record of a Senate Banking subcommittee hearing, the banking trade body said that choosing between the various CBDC designs requires “serious and complex policy tradeoffs” and that too often CBDC proponents take a “highlight reel” approach to describing CBDC, “cherry-picking all the perceived benefits, while downplaying the serious risks to consumers and our financial system.”
The ABA named no names but seems to be pointing fingers at the many distributed ledger technology firms that are offering their services to develop CBDCs. These include R3’s Corda, Ethereum, Stellar, Hedera, eftpos, and Ripple’s private version of the XRP Ledger.
“Given the additional complexity, delay, and transition costs involved in creating a new form of money, there are strong efficiency interests that suggest CBDC should only be pursued as a final option to meet clearly-defined public policy goals that cannot be achieved through payments innovations that leverage existing digital dollars.
“As of today, those use cases have not emerged. If a viable use case for CBDC in the United States does emerge in the future, design choices must be carefully considered to ensure that the benefits, as well as the risks of introducing a CBDC, are fully appreciated”, the association stated.
While the ABA sees no viable use case for a digital dollar, the European Central Bank is pursuing a digital euro within the next five years. ECB’s Panetta has proposed a plan that limits each citizen’s wallet to €3,000.
One of the strongest contestants for the development of the digital euro is Ripple, which seems to be a favorite in the eyes of France.
The whole world is watching what the United States will do regarding a digital dollar. In May, Federal Reserve Chairman Jerome Powell spoke about the central bank’s work:
“The effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers that allow money to flow on a daily basis.
“Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation”, he stated, adding that the Fed plans to unveil protypes by July.
Ripple Labs is most probably looking to strike a deal with the Fed to use XRP in the system. The firm, however, is somewhat stuck in a lawsuit with the SEC, which may be hampering the firm’s panache among central banks.
And although Brad Garlinghouse’s company keeps on signing new clients, its competitors are gaining ground. This week, a group of banks have started testing a new FX swaps platform developed by Finteum and powered by R3 and Fnality – aka “XRP Killer”.
The SEC and Ripple may soon reach a settlement deal, which should allow the firm going forward with its IPO plans. The regulator, however, seems to be using tactics to stall the case, including not handing over internal documents regarding cryptocurrencies BTC, ETH, and Ripple’s XRP. Should the SEC remain uncooperative, the Judge may order monetary sanctions.
FinanceFeeds has recently covered attorney Jeremy Hogan’s view of what the settlement would look like. One of the terms could bottleneck the flow of XRP.