Yesterday, Jerome Powell, Chairman of the United States Federal Reserve, noted that a central bank digital currency could benefit the financial sector by serving as a way to upend the fragmentation of the market for a digital alternative to traditional fiat currency. This, he predicted, may steal market share from cryptocurrencies and stablecoins, and he noted that it is an argument in favor of a CBDC. A paper which explores digital payments is slated to be released by the Fed as early as September.
“Not only did Powell discuss the potential benefit that a CBDC would provide, in his view, but he also discussed that, in order for digital assets of any type to take on a bigger role in the financial system, greater regulation would be required. This is something that we’ve been saying for quite some time. The fact that Powell, arguably one of the most powerful actors on the global financial stage, is talking about increased regulation can only be a good thing. It may be just the push that many regulators need to embrace spending resources to make a more coherent, standardized set of guidance for exchanges,” explained Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.
“For some time, it has been apparent that digital assets are here to stay. Ultimately, CBDCs are going to be a mainstay of the financial system of the future. But, there are so many different applications for blockchain technologies, and we’re going to see lots of innovative ways to embrace digital assets. The industry is waiting on pins and needles for a more standardized set of guidance, especially as related to AML issues,” noted Gardner.
“We have a pretty strong regulatory framework around bank deposits, for example, or money market funds… That doesn’t exist currently for stablecoins, and if they’re going to be a significant part of the payments universe – which we don’t think crypto assets will be but stablecoins might be – then we need an appropriate regulatory framework,” Powell said during the course of his remarks.
“There is no doubt that an appropriate regulatory framework is a necessity. Leaving a legal gray area in an area of the payments universe doesn’t make sense — not for the industry, and not for the public good,” opined Gardner.
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Over the past twenty years, the company has built technology for the world’s most notable exchanges, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“In the interim, we’ve created a Trust Score system, which would allow exchanges to bring daylight to their operations and help users and regulatory bodies gauge compliance in key areas. We’ve worked with clients on being proactive and implementing AML protocols before regulators have mandated them. We’ve led the fight for security in an industry which is brimming with innovation, and I can’t wait to see what’s in store for it, once regulators fully embrace the technology,” said Gardner.
