According to John Reed Stark’s tweet, government-issued staplecoins not only pose risks to the stability of the international financial system, but also open a “Pandora’s Box” of privacy and cybersecurity concerns. Stark supported Senator Ted Cruz, who introduced a bill in March that would prohibit the U.S. Federal Reserve (Fed) from launching a digital dollar.
“As with cryptocurrencies and Stablecoins, we need to start by answering the question: what problem are CBDCs really solving, and why do we need them? There is no answer to that question,” Stark wrote.
Former SEC official thinks existing digital currencies already work very well and are trusted. They are regulated by government agencies and run by financial institutions insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), Stark added.
Meanwhile, the former SEC official criticized politicians and lawmakers for speaking out in favor of cryptocurrency innovation. He cited the statements of crypto-enthusiasts claiming that banks face the same risks as cryptocurrencies and referring to the recent collapse of Signature, SVB and Republic banks. Still, banks are heavily regulated, and cryptocurrencies lack insurance and proper oversight from regulators, Stark said.
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“The lack of consumer protections, inspections, audits, licensing, mandatory cybersecurity standards, fiduciaries, separation of customer assets from exchange assets, rules against insider trading or market manipulation all make the crypto ecosystem dangerous and vulnerable to fraud,” Stark added.
He said the risks of transactions with U.S.-registered financial institutions pale in comparison to the risks of transactions that use staplecoins such as USDT. At any rate, banks, brokerages and credit card issuers can offer compensation in the event of fraud, negligence or even simple error, unlike cryptocurrency platforms.
Recall that in May, Stark called Tether, which issues USDT, a giant house of cards. The ex-official’s distrust of the company was caused by the lack of a legal framework regulating the activities of stabelcoin issuers.<br