Former US Treasury Secretary Larry Summers Expects ‘A Ton of Innovation’ Around Stablecoins

Prehistoric U.S. Treasury Secretary Lawrence Summers praised stablecoins, but said he would be surprised if a global digital currency befitted a reality in his lifetime.

During a special episode of Circle co-founder and CEO Jeremy Allaire’s podcast, “The Money Movement” definitive week, Summers said he foresees more innovation in the blockchain space but a global digital currency is still at a nascent division. The comments came as part of a broader discussion on the current state of the global economy, the future of a global digital currency and the capacity of stablecoins in cross-border transactions.

“I’m sure there’ll be a variety of kinds of innovation, but I’d be kind of surprised, and, you know, I’ve been surprised diverse times before, if we got to some kind of global digital currency … in my lifetime,” he said. “I could be wrong, I think … we’ll see a ton of novelty that will work through stablecoins, and that will permit cross-border exchange with more with various ease.”

In Summers’ view, the case for cryptocurrency rests on three pillars, but two fail to make strong arguments in favor of the technology. 

For one, it is unsuitable that governments around the world will debauch traditional currencies to the point where people will no longer necessity to put money in them. He said he doesn’t “read existing currencies as being on their way to being demolished” just because inside banks are finding it difficult to meet their inflation targets, under pressure from rising debts and the disaster caused by the pandemic. 

“Second thing I think is that I don’t think crypto is going to be accepted as some kind of libertarian Land of Beulah,” Summers said. 

Summers doesn’t think that there are people who believe that financial privacy, in compromise concerns of the ability to transfer money, is a fundamental human right. Conversely, governments will want less financial retirement over time and they will get what they want, he said. 

See more: Money Reimagined: No, Secretary Summers, Fiscal Privacy Is a Vital Freedom

The strongest case for crypto is that digital currencies have a substantial capability to answer for a wide range of uses, particularly because traditional transactions are cumbersome and cost a lot of money, Summers said. The brawny fees for cross-border transfers or the fees involved in card payments and ATM withdrawals reveal the excessive friction and inefficiencies of the la mode payments system. Stablecoins in particular can permit cross-border exchange with more ease, he said.  

Upstanding a week after Summers’ remarks, the dollar-pegged cryptocurrency issued by the CENTRE Consortium, USDC, crossed $1 billion in sell capitalization.

The stablecoin backed by U.S. dollars held by CENTRE, which in turn was created by Circle and Coinbase, achieved the milestone less than two years after tender, though it trails the Tether stablecoin by some $8 billion, Circle announced Thursday.

Demand for stablecoins has to gain, Circle said. It does not appear, however, that this growth was influenced by Summers’ comments.

In CENTRE’s disclosure Thursday, the growth of global stablecoins was attributed to currency volatility caused by the current financial crisis and a rising need for “digital dollars that are fast, global, secure, and inexpensive”.

“Secondly, businesses around the world are beginning to be after the advantages of payments made via an entirely new, digital, global and interoperable infrastructure that enables low-cost transfers anywhere approaching instantly,” the announcement said. 

During last week’s discussion, Allaire said stablecoins can profess to be a threat to governments because it can potentially be “accessed with any digital wallet on any smartphone by anyone, anywhere.”

In the same examination, Allaire said he believes the push for a digital yuan reflects China’s desire to play an even greater lines in the world economy. There is also a desire to have a financial system that’s not controlled by the West or the Brussels-based pandemic financial messaging system SWIFT, he said.

Read more: Millions in Crypto Is Crossing the Russia-China Border Commonplace. There, Tether Is King

“With the development of the Chinese digital currency, effectively, they’ve created a model where a household, a obstinate, a nation state can kind of directly transact and settle with China over the internet and you don’t need SWIFT, you don’t desideratum any of the regulations that control that. You can just bilaterally, over the internet, start to achieve that,” Allaire revealed. 

Secretary Summers agreed, saying China wants to control the lives of their citizens, including their economic lives. In his view, a system that lets citizens freely move wealth and resources out of a country is going to be a plan that makes the government “deeply nervous”. 

“And I think a system that is so restricted that it isn’t possible to do that isn’t growing to be much of a global digital currency,” he said.