According to the Argentine entity, anchored currencies might open a new channel for capital outflow. The institution sees emerging economies at greater risk in the face of stablecoins.
The Central Bank of Argentina (BCRA) considers that it might be risky to use stablecoins for the national economy. It reluctantly sees the possible impact of these assets on capital outflow and the potential increase in vulnerabilities for the local currency.
This evaluation emerges from the Financial Stability Report issued by the Argentine organization, corresponding to the second half of the year 2019. In the document, the BCRA devotes an entire section to the analysis of stablecoins, especially focusing on their possible implications for financial stability.
The BCRA places special emphasis on the ability of anchored currencies to scale to cross-border operations, going beyond being a means of payment for local transactions. For that reason, the institution considers a capital flight to be a potential risk of using anchored currencies, the same as might occur with fiat currencies or non-anchored cryptocurrencies.
Although the report states that stablecoins may especially pose risks to emerging economies, it makes it clear that developed economies might also be affected.
The Argentine Central Bank concludes that it is necessary to further in the analysis of appropriate designs, as well as in the examination and eventual implementation of a clear regulation that is proportional to the said risks.
Stablecoins in Global Discussion
The analysis of stablecoins by the BCRA is based on a discussion that has recently been gaining ground, particularly among governmental financial institutions worldwide.
Argentina’s position is consistent with those of multilateral instances such as the G7, which brings together Germany, Canada, the United States, France, Italy, Japan, and the United Kingdom. In a report submitted last October, the G7 and the Bank for International Settlements (BIS) considered stablecoins (particularly Facebook’s Libra) to be a growing threat to monetary policies and financial stability.
For its part, the Financial Stability Board (FSB) of the G20 has also begun to pay attention to the matter. The chairman of the council, Randal K. Quarles, urges the finance ministers and central bank officials that comprise the working group to pay special attention to possible financial stability problems due to global anchored cryptocurrencies. Argentina is particularly one of the three Latin American countries that comprise the G20, a group of developed and emerging countries.
Perhaps the most surprising position until now was released in the middle of the month of November. The United States Federal Reserve (Fed), through its Financial Stability Report, took a positive stance on the possible impact of the global use of anchored currencies.
The document presented by the Fed considers that stablecoins could complement currently used payment systems and lead to a new type of exchange. Besides, they could resolve one of the main concerns about the use of cryptocurrencies, namely volatility.
Despite its positive position, the report also considers possible unplanned risks of the implementation of stablecoins globally. These aspects coincide with the considerations presented by the Central Bank of the Argentine Republic.
By Willmen Blanco
