Circle recommends Central Bank of Ireland adopt public blockchains for consumer protection

Quick take

• Circle submits a response to the Central Bank of Ireland highlighting the benefits of blockchain-based financial services for consumers.
• Circle offers recommendations on how financial supervision can support innovation while ensuring the best interests of consumers.
• Public blockchains can increase competition and unbundle financial services, distribute consumer privacy and improve capabilities in the fight against illicit finance.
• Companies offering new financial products should contact the supervisory authorities before a formal application.
• Financial regulators should actively inform consumers about market abuse/abnormalities by tracking and analyzing real-time blockchain transaction data.

Circular reply to Central Bank of Ireland

USDC stablecoin issuer Circle released a response on February 17 to the Central Bank of Ireland’s discussion paper on consumer protection, which asked for industry insights to improve consumer-focused financial products.

Circle sent its written recommendations on February 14 on how public blockchains can allow financial regulators to “support innovation while ensuring the best interests of consumers” through products such as stablecoins such as USDC and EUROC.

The stablecoin provider listed a number of benefits of blockchain technology in relation to consumer protection, including increased competition, unbundling of financial services, privacy, improved financial literacy through transparency and the ability for regulators to track data on-chain. An announcement from Circle posted on the website said;

“Blockchain-based payment systems have the potential to disintegrate proprietary and closed data repositories accumulated by financial services providers and large technology companies that could pose a risk to the privacy and security of consumers.”

Circle also recommended how financial regulation can support innovation while protecting the interests of consumers. It urged regulators to engage in “crypto-native” activities such as reviewing on-chain data and assessing digital assets based on their unique design with industry guidance that takes “the different asset types, activities, risks and incentives into account.”

The proactive approach recommended by Circle included encouraging “firms offering new financial products” to encourage engagement with regulators before any formal applications.

A “regulatory sandbox” would allow digital asset firms to work with regulators and supervisors to test new technologies and approaches. Circle suggested that the approach could make firms more willing to cooperate with authorities and regulators to ensure that those offering financial products are acting in the best interests of their customers.