New York Fed Cryptocurrency Report Released! Is Banking in Danger?

Cryptocurrency The growth in the market is also affecting stablecoins closely. Because after the last rallies, the market value of the two biggest stablecoins USDT and USDC has seen a significant growth.

As of our news time USDT‘s market value is 78 billion dollars, USDCIts market value is around $50 billion.

So, can these stablecoins, which form the main backbone of the crypto money markets, coexist with the traditional banking system?

of the USA stablecoin The New York FED has published a report these days as it prepares to regulate its issuance rules.

In the report, digital assets While discussing how it can be a part of the traditional banking system, the risks posed by stablecoins are also discussed.

In the research, it was stated that the stablecoin supply reached 130 billion dollars. Researchers of the New York Fed used the following statements about stablecoins:

“If stablecoins are widely adopted across the financial system, they could have a significant impact on financial institutions’ balance sheets.

With appropriate safeguards and regulation, stablecoins have the potential to provide the same level of stability as traditional forms of value.”

The researchers considered the widespread adoption of reserve-backed stablecoins in the financial system in 3 scenarios.

Scenario 1: “Narrow Bank”

stablecoins refers to tokenization in exchange for cash.

“A narrow banking framework minimizes the risk of ‘operating’ on stable currencies, but could potentially reduce credit intermediation. The impact on bank loans will be minimal.”

Scenario 2: “Two-Tier Brokerage”

stablecoins refers to backing it with deposits held in commercial banks and banks lending these stablecoins.

Contrary to the narrow bank approach, large inflows into stablecoins could have a positive impact on lending, while the overall balance sheets and assets of commercial and central banks will remain unchanged.

Scenario 3: “Securities”

stablecoins Securities equivalent to cash will need to be held as collateral.

The central bank’s balance sheet will contract slightly with lower banking reserves.

The impact on lending will be neutral as commercial bank deposits will be recycled back into the banking system.


In the conclusion of the report, the researchers noted that the “Two-Tier Brokerage” system could help preserve traditional forms of bank lending even as stablecoins grow.

It was stated that the most stability can be achieved with the “Narrow Bank” approach, but this will also eliminate the credit intermediation of stablecoins.

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