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Powell Says Fed Will Release Crypto Report ‘Within Weeks’

Powell Says Fed Will Release Crypto Report 'Within Weeks'

CBDCs

How do you make payments or transfer without using the dollar or any fiat currency? Simple. The Central bank digital currency (CBDC) comes in handy here. 

The Central bank's digital currency is the digital equivalent of a country’s fiat currency. It does everything the fiat currency does; store value, make payments, and trade, but instead of being paper money, the CBDC is built on a distributed ledger and could be amplified using blockchain technology. 

 

While the popular opinion is that Central bank digital currencies are more like bitcoin and Ethereum that can be traded on exchanges like Binance and https://redot.com/, these claims cannot be farther from the truth. 

The market does not determine the value of CBDC. Instead, a country’s monetary policies and economic management influence its value. The governance of these currencies is not decentralized like many coins and tokens. Rather, they are issued and managed by the country’s central bank. 

CBDCs have been coming more into the limelight because they are secured and less volatile than most digital assets since their value is pegged to the nation’s fiat currency. Their growth has been unprecedented and different country’s central banks have been looking into integrating them into their nation’s finances. Nigeria, the Bahamas, Antigua and Barbuda, and Grenada are some of the nations with their fully launched CBDC.

The CBDC has some issues that need clarification and general consensus voting, including how much anonymity a user is afforded, the availability of these digital currencies, and how well they can replace or complement real notes. Despite these, many economists are berating the United States government for taking a cautious step as regards CBDC. Many call it a long-overdue innovation for a country as big as the US, while some others are assuming the United States has lost its leading touch in innovation. 

Let’s see the United States and CBDCs. 

The United States and CBDCs

In a new space with a lot of potential, the United States of America would have been expected to be at the forefront of this innovation as they have done with some of the best crypto exchanges in the world. Rather, it has taken the back seat and ceded the lead to China majorly. 

 Recent crypto news says that having launched their digital currency in 2021 which hit over $5 billion in transaction volume, China is planning to launch the digital yuan for foreigners during the Beijing Winter Olympics in 2022. Although there are clamors all over the world for athletes to boycott it, the news just explains how much the demand for the digital yuan can influence the Chinese economy. Remember the basic economic law of demand and supply? Yeah.

In the USA, the Feds have been working on a workable plan for CBDCs since September 2021 and Tim Massad, former chairman of the Commodity Futures Trading Commission till2017 expressed his disappointment with the speed at which the USA is handling the CBDCs. 

He believes that the United States could be more proactive in its approach to modernizing its payment means, and his assertions that the improvements to the United States payment systems might just lie in digitizing it. 

Although stablecoins have been touted as a worthy replacement if the USA does not hasten its plans for a CBDC, regulatory and insurance risks with the stable coins make them quite unsuitable for the large volume of transactions the CBDCs will attract.

Fed’s reports on CBDC

After he was nominated for a second tenure as the Federal Reserve’s chairman, Jerome Powell announced to the United states senate committee the long-awaited crypto report on digital currencies and the CBDC will be released in coming weeks. 

During his confirmation hearing, Powell was asked by Senator Mike Crapo, a right-winged politician from Idaho about the timing of the crypto report. He confessed that the progress has been quite lagging, since they did not get it to where they needed it, but it will be published in the next few weeks since the project has reached an effective milestone. 

Adept crypto personnel will not be too over joyous about Powell's comment on the crypto report. It mirrors the exact words he said during the senate banking committee meeting in July and November. 

While the crypto report will focus on the cryptocurrency market in general, special attention will be given to CBDCs and it will be an avenue to answer many pressing questions in the minds of United States investors. One of those questions will be how well CBDC can cope with privately-issued stablecoins in the USA. Powell explained that both digital currencies can cohabit peacefully, and he also supported Senator Pat Toomey’s claim that the Feds do not have the historical backing to be a well-rounded retail bank. 

Conclusion

While the United States Federal Reserve seems unperturbed by China’s keen interests in CBDCs despite their distaste for cryptocurrencies, many other countries will be taking notes from China’s use of the digital Yuan in the winter Olympics. As is fondly said, the cryptocurrency space is largely untapped when put side by side to the traditional paper money, but there is no denying, even from antagonists, that the current financial system will be greatly improved by digitalization. The United States was the first country to come up with the notion of digital fiat but has soon lost its standing to China and many Caribbean countries. 

The Feds chairman assured us that it is better to get it right than get it fast, and it would be exciting to see what other features (if any) we would see from CBDCs. 

stablecoins, on the other hand, have not seen much success with the United States financial body. Powell suggested in 2020 that stablecoins should be monitored and regulated by the government as it does not have any framework for deposits and money market funds, but still, they can be useful consumer-centric financial vehicles

Most stablecoins are also not backed by cash as earlier believed. The most popular one, tether, is backed with commercial paper, a short-term financial obligation. 

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