Amundi Warns of Global Payment System Risks from U.S. Stablecoin Policy

Amundi, a prominent European asset management firm, has raised concerns about the potential destabilizing effects of the U.S. stablecoin policy on the global payment system. The U.S. Senate recently passed the GENIUS Act, which aims to establish a regulatory framework for stablecoins pegged to the U.S. dollar. This legislation, expected to be approved by the House of Representatives and signed into law by the President, has sparked worries about significant shifts in capital flows and the potential for economic "dollarization" in other countries.

The Chief Investment Officer of Amundi expressed uncertainty about the implications of stablecoins, noting that while they could facilitate faster and cheaper cross-border transactions, their widespread use could impact financial stability. The concern is that stablecoins could act as "quasi-banks," attracting deposits due to their perceived liquidity and being used as direct payment methods, thereby disrupting the stability of the global payment system.

Concerns about the impact of U.S. stablecoin policies extend beyond Europe. The Italian Finance Minister highlighted the potential for stablecoins to undermine the euro's dominance in cross-border payments, raising questions about the future of the European currency in a digital financial landscape. The Governor of the Bank of England also warned that the rise of stablecoins could erode public trust in the financial system, emphasizing the need for robust regulatory frameworks to mitigate associated risks.

The Bank for International Settlements (BIS) has also cautioned that stablecoins may not be suitable as a primary form of currency due to their lack of "unity," "elasticity," and "integrity." Stablecoins, while offering advantages as a medium of exchange, fail to meet key criteria for a stable currency. They lack universal acceptance, flexible supply adjustment, and are susceptible to fraud and financial crimes, making them less reliable as a stable form of currency.

The cross-border nature of stablecoins poses significant challenges for national regulators, as they can be used to circumvent local regulations and facilitate illicit activities. The BIS report underscored the need for international coordination to address these challenges and ensure effective regulation of stablecoins. The Hong Kong Monetary Authority's Chief Executive also called for a measured approach to stablecoins, viewing them as a payment tool rather than an investment vehicle and emphasizing the need for robust regulatory frameworks to mitigate associated risks.

The International Monetary Fund (IMF) has also expressed concerns about the potential risks posed by stablecoins, noting their development presents both opportunities and challenges. The IMF highlighted the need for effective regulation to address risks such as money laundering and terrorist financing. In conclusion, while stablecoins offer potential benefits as a medium of exchange, their lack of key attributes raises significant concerns about their suitability as a primary form of currency. The global financial community must collaborate to develop robust regulatory frameworks to mitigate risks and ensure the safe and sustainable development of stablecoins.