The central bank yesterday cautioned that privately issued stablecoins could divert deposits from commercial banks and weaken monetary policy, even as it acknowledged the tokens’ potential role in broader payment and financial innovation.
However, digital tokens are not expected to be widely used for day-to-day payments in Taiwan in the near term, central bank Deputy Governor Chu Mei-lie (朱美麗) told a meeting of the legislature’s Finance Committee.
Stablecoins are cryptocurrencies designed to maintain a stable value, usually by pegging their price to a fiat currency.
Photo: Chen Mei-ying, Taipei Times
If private stablecoins were legalized, issuers would be required to maintain reserves akin to electronic payment operators, including demand-deposit reserves and high-quality liquid assets, such as government bonds, at levels equal to or exceeding the value of tokens in circulation, Chu said.
Lawmakers raised concerns that allowing private entities to issue money-like instruments could pose risks to financial stability and erode the central bank’s control over money supply.
Chu said that funds could migrate from traditional bank deposits to stablecoin issuers, potentially weakening banks’ funding bases.
The broader monetary impact would depend on how the issuers deploy their funds — whether they remain within the banking system or are invested in bonds, securities or other financial assets, she added.
“Stablecoins could influence inflation, interest rates and the effectiveness of monetary policy,” Chu said.
The rise of private digital currency also raises concerns about monetary sovereignty, liquidity management and the central bank’s ability to steer the economy through conventional policy tools.
Taiwan is finalizing rules to regulate virtual-asset platforms and stablecoin issuers, reflecting a global push to tighten oversight of cryptocurrencies following high-profile token failures and instances of market volatility.
The US Congress enacted the Guiding and Establishing National Innovation for US Stablecoins Act, creating a federal framework for stablecoin regulation.
The Financial Supervisory Commission has indicated that existing banks should be the primary issuers of stablecoins, rather than leaving it to unregulated entities.
Cathay United Bank (國泰世華銀行), the lending arm of Cathay Financial Holding Co (國泰金控), said it is exploring the issuance of stablecoins, but emphasized that tokens must be interoperable across financial institutions to provide meaningful utility.
Major payment networks including Visa and Mastercard have already adopted stablecoin payments, bringing the digital tokens closer to being directly exchangeable with traditional currencies.
The developments highlight the rising significance of stablecoins in global finance, even as their domestic adoption in Taiwan is still being considered, the bank said.
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