Central banks and international financial regulators are increasingly prioritizing bank deposits that are encrypted over stablecoins for the future of digital finance.
Cryptocurrency deposits retain traditional benefits while leveraging the flexibility and interoperability of Blockchain technology, helping to minimize the risk of depreciation compared to stablecoins.
MAIN CONTENT
The Bank of England prioritizes cryptocurrency deposits over stablecoins in digital financial regulation.
Cryptocurrency deposits maintain protection like deposit insurance and comply with AML/KYC.
Non-transferable cryptocurrency deposits are easily supported to protect monetary stability.
What are cryptocurrency deposits and why are they favored?
Leading financial experts like Nikolaos Panigirtzoglou – Director of JPMorgan, stated that cryptocurrency deposits are commercial bank deposits recorded on the Blockchain, retaining traditional protection mechanisms while increasing programmability and interaction.
Cryptocurrency deposits allow banks to offer digital assets while still ensuring deposit insurance, complying with capital regulations, and being supported by the central bank if necessary.
The Bank of England and Andrew Bailey's views on cryptocurrency deposits
The Bank of England and Governor Andrew Bailey have clearly stated their preference for cryptocurrency bank deposits over stablecoins, reflecting a trend of strict cryptocurrency regulation and user protection.
The Bank of England wants banks to focus on providing cryptocurrency deposits instead of issuing stablecoins, in order to minimize market risks and ensure financial stability.
Andrew Bailey, Governor of the Bank of England, 2024
Classification of cryptocurrency deposits and differences from stablecoins
According to JPMorgan analysts, cryptocurrency deposits are divided into two types: transferable deposits similar to stablecoins and non-transferable deposits, which can only be settled between banks at a fixed value.
The non-transferable deposit type receives regulatory support as it helps preserve the principle of 'currency for currency' – ensuring that currencies can be exchanged at par.
Why are stablecoins more susceptible to depreciation than non-transferable cryptocurrency deposits?
Volatility due to credit risk or liquidity imbalances causes stablecoins and transferable deposits to deviate from par value, as seen in crises from Terra, FTX, and Silicon Valley Bank.
The volatility of stablecoins in previous events has highlighted the importance of bank deposits that are firmly guaranteed on the Blockchain.
Nikolaos Panigirtzoglou, Director of JPMorgan, 2024
The benefits of user protection and financial stability of cryptocurrency deposits
Cryptocurrency deposits combine the advantages of modern technology with traditional protective mechanisms like deposit insurance and anti-money laundering (AML/KYC) controls, creating a stable and reliable foundation for digital finance.
Frequently Asked Questions
How do cryptocurrency deposits differ from stablecoins?
Cryptocurrency deposits are guaranteed by banks through insurance and capital compliance, while stablecoins mainly rely on collateral and carry a greater risk of volatility.
Can the Bank of England widely adopt cryptocurrency deposits?
The Bank of England prioritizes the development of cryptocurrency deposits because they are stable and compliant with regulations, suitable for the future of digital finance.
Do cryptocurrency deposits carry a risk of depreciation?
Non-transferable cryptocurrency deposits nearly eliminate the risk of depreciation by maintaining a par exchange rate, unlike stablecoins that are prone to market volatility.
Are cryptocurrency deposits secure?
Cryptocurrency deposits recorded on the Blockchain combine AML/KYC mechanisms and deposit insurance, enhancing the security and transparency of assets.
Will cryptocurrency deposits become the financial standard of the future?
Leading experts believe that cryptocurrency deposits have many advantages to become the main solution in global digital finance, especially as central banks support them.
Source: https://tintucbitcoin.com/chuyen-gia-jpmorgan-token-ngan-hang-uu-tien/
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