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Stablecoins could be counterweight to US dollar hegemony, says BoE's Carney

Stablecoins — cryptocurrencies backed by a basket of different currencies and bonds — could play an important role in the movement away from U.S. dollar hegemony in global markets, according to Mark Carney, governor of the Bank of England.

Carney was speaking on a panel on big tech and finance at at the International Monetary Fund's annual meeting in Washington, D.C., on Oct. 16.

"There is an upside to a currency linked to a basket of assets. This could be part of the rebuilding of the system away from the hegemony of the U.S. dollar," Carney said. This would be fitting for the "multi-polar" world financial system that exists today, he said.

If done properly, stablecoins could be a useful addition to the global supply of safe assets, Carney said.

The BoE governor has previously said that a global digital reserve currency backed by central banks could end the dominance of the greenback, and would soften the impact of dollar movements on smaller economies.

Questions remain

However, there are questions that need to be clarified if stablecoins are to go mainstream, such as how exactly the coins are backed, whether holders of the coins have any claim on the underlying assets, and what happens if the mix of assets backing the coin is adjusted, he said.

On the topic of whether the Bank of England would adopt stablecoins, Carney said conversations are just beginning and that decisions of this kind "do not happen overnight."

He also said it is crucial for central banks to play a role in improving payment networks, since the current infrastructure in most countries is too slow and expensive for consumers.

Central bank digital currencies could be a solution, he said.

"There are fundamental changes coming [in payments]. We will be at the forefront of innovation," he said.

Libra

The Libra Association, a consortium of Facebook Inc. and other companies, announced plans in June this year to launch its Libra stablecoin. It is designed to be backed by a range of international currencies and bonds.

Also speaking on the IMF panel was David Marcus, head of Calibra, Facebook's cryptocurrency team, and co-creator of Libra.

Marcus said the Libra project was still on track despite losing a slew of key members over the past week, including Visa Inc. and Stripe Inc., and was in the process of attracting new partners.

"There is no shortage of desire and shared mission to join this effort," he said.