Lorie Logan, Speech: Opening Remarks for Technology-Enabled Disruption, Lessons from the Pandemic and the Path Ahead

“Amid the overall growth of digital assets, the private sector has invented an array of stablecoins. If these assets’ value is indeed safe and stable, they have the potential to serve as a form of private money—that is, a unit of account, store of value and medium of exchange. But safety and stability are not automatic, as the high-profile collapses of some algorithmic stablecoins have demonstrated. Even asset-backed stablecoins may fluctuate significantly in value if the assets backing them are not sufficiently safe or liquid, and the potential for these fluctuations can in turn lead to destabilizing runs and fire sales. Some jurisdictions are considering ways to bring stablecoins inside the regulatory perimeter as banks or other licensed entities, potentially creating the ability to back stablecoins with central bank reserves. But as I’ve discussed elsewhere, this could drive large and variable demand for central bank liabilities or could change the incentives created by the monetary policy implementation framework, and it is important to take a holistic approach to these decisions.”