Banking Chaos a ‘Reminder’ of Fractional-Reserve Risks: Circle Global Policy VP

The recent banking chaos caused by the failure of several European banks is a stark reminder of the risks involved in fractional-reserve banking, according to Circle Global Policy VP. The development highlights the need for transparency and better regulation in the banking system to ensure the safety of depositors’ funds. The VP also pointed out that the emergence of digital currencies such as Bitcoin and stablecoins can potentially eliminate the need for fractional-reserve banking and the associated risks.

Circle Global Policy Lead Seeks Regulatory Change Through New CFTC Committee Role

Circle’s global policy VP, Corey Then, has been given a new advisory role on the newly constituted Tech Committee of the US Commodity Futures Trading Commission (CFTC). The CFTC committee aims to inform and educate the government on emerging technologies, including artificial intelligence and cryptocurrencies. Circle is among the ten crypto-centric members of the committee.

Then’s new role comes as the recent US banking crisis has put fractional reserve banking under scrutiny, revealing that the system requires confidence to operate effectively. In response, Then is seeking more inclusive regulatory policies for stablecoin issuers by advocating direct deposit of funds at the Federal Reserve to eliminate bank counterparty risk. He outlined a series of redemption, reserves, and disclosure standards that would allow access to the Fed for issuers if met.

Prominent firms that have sent representatives to the committee include TRM Labs, Fireblocks, Paradigm, Circle, and Ava Labs, among others. The committee is expected to hold its first meeting since December 2020 on March 22, 2023.

This is a crucial role for Circle, as it issues the market’s second-largest stablecoin by market capitalization, USDC. The stablecoin briefly lost its dollar peg after it was revealed that Circle had custodied $3.3 billion of its reserves with the now-defunct Silicon Valley Bank (SVB).

Then praised the CFTC’s “collaborative approach” to emerging technologies, saying, “Circle can play an important role in making the global financial system safer and more resilient, and we look forward to engaging with the TAC on this important endeavor.”

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