Why doesn’t the Fed like virtual currencies, especially stablecoins?
The Fed chairman said the main motivation for the US to issue its central bank digital currency (CBDC) is to eliminate the ability to use virtual currency in the US.
Fed Chairman Jerome Powell. |
During his monetary policy hearing before the US Congress last week, the chairman of the US Federal Reserve, Jerome Powell, once again made it clear that he does not like cryptocurrencies, especially stablecoins.
Mr Powell said the main motivation for the US to issue its central bank digital currency (CBDC) is to eliminate the ability to use virtual currency on US soil. “There would be no need for stablecoins or virtual currencies if there was an American digital currency. I think that’s one of the strong arguments in favor of the central bank issuing digital currencies, ”said Powell.
Fed officials and US Congressmen have long been concerned about the emergence of stablecoins – virtual currencies attached to real assets such as paper money such as cash and cash equivalents U.S. dollar or a commodity like gold, typically tether, that is pegged to the USD. Stablecoins are used more and more in domestic and international transactions in the US and many other countries, which worries central banks because they are not empowered to regulate the sector.
“I understand why they’re scared of stablecoins,” said Nic Carter, founder of Castle Insland Ventures. “I understand why they worry when a lot of commercial banking moves to this largely unregulated sector.”
However, Mr. Powell is also not really enthusiastic about the US release of a separate CBDC. When asked by a congressman, he replied that he had not yet determined whether the benefit was U.S. dollar The digital benefits outweigh the costs.
U.S. dollar DIGITAL COMPETITION WITH STABLECOIN?
The only thing that is clear is that the Fed no longer wants to “storm” stablecoins.
“We have a tradition in this country where people’s money is kept and what is really safe. That is not possible with stablecoins, and if they are to become an essential part of payment transactions, we need the right framework. At the moment we don’t have such a framework, “said the Fed chief.
As mentioned above, Mr. Powell believes that the Fed issuing a CBDC to compete on stablecoins, but analysts point out that a U.S. dollar Digital will not have a major advantage like stablecoins.
“Stablecoins are popular because they are independent of politicians and central banks,” said Mati Greenspan, portfolio manager at Quantum Economics. “People want a separation between the state and money. CBDC doesn’t have that. “
Some experts say that technically, a U.S. dollar Digital currencies issued by the Fed are more secure than privately issued stablecoins, but stablecoin users don’t really need security, they need an easier way to make transactions, especially with transactions.
Alyse Killeen, founder of Bitcoin-focused venture capital firm Stillmark, believes the presence of a CBDC in the US will not devalue the cryptocurrency.
“Many people become aware of the loss of autonomy when they have to wait for permission to spend. It is a relatively common experience to be blocked during a transaction on the banking system, on a debit or credit card, outside of bank opening hours, or in addition to personal spending habits identified by the bank, Killeen said. “A Fed-issued digital currency could have such problems.”
REASONS FED is afraid of STABLECOIN
Analysts explained the Fed’s concerns about the rise of virtual currencies, including stablecoins, for a number of reasons.
The first is the fear of losing control of the currency. According to Rutgers University economist Michael Bordo, the social network Facebook is planning to issue a stablecoin called Diem, Monetary Policy. “
There is also concern about the decline in monetary sovereignty. “If Diem or even a Chinese CBDC is taken over by many other countries, U.S. dollar will lose his dominant position, ”said Bordo.
Central banks like the Fed also ensure that external stablecoins are linked to real money, but are not actually backed by monetary sovereignty, but by financial investments. This is similar to how money market funds work, said Ronit Ghose, director of financial technology and digital assets at Citi Global Insights.
“Stablecoin is like watching a ‘fake’ movie. Essentially, you don’t get to see the original film, ”said Ghose.
This is what is really worrying the Fed. Virtual currencies like Bitcoin do not “fake” like real money, but “Stablecoins can give the impression that you are using something of a fixed value in real money,” which it does not.
A huy
VnEconomy
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