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The Fed warns :
stablecoins are a threat to banks and lending (original)
The Council on Depositary Institutions under the Fed (CDIAC) said that non-bank stablecoins can accelerate the outflow of deposits from traditional banks and weaken lending to small businesses and households.
According to the council:
- Stablecoins are a digital analogue of the money market funds of the late 20th century, which have already changed the financial landscape once
- They create uncontrolled competition for bank deposits without falling under the same liquidity and supervision requirements
- This can undermine the basis of local lending, especially in small communities
