In the United States, there will be no ban on cryptocurrencies – but one wonders what will happen to central bank digital currencies, especially the digital dollar, when (maybe if) they will be. introduced into what will undoubtedly be a crowded digital currency realm. choices.
Federal Reserve Chairman Jerome Powell at a hearing on Capitol Hill late last week said there was “no intention to ban” cryptos. He added that stablecoins are “like bank deposits, but they are to some extent outside the regulatory scope and it is appropriate that they are regulated.”
Read also: Fed’s Powell says he won’t try to ban crypto
Thus, there will be no massive crackdown on bitcoin and its peers, as seen in China. But Powell’s comments are less what we might call a clearance of the trail for cryptos and more a reaffirmation of the status quo.
In this case, cryptos are allowed to exist, to be traded on exchanges and possibly to make further forays into commerce.
But the regulatory gaze is on them, and we have to come back to Powell’s statements this summer.
At the time, the Fed chairman said in a comment to a congressional committee that with a US digital currency in place, “you wouldn’t need stablecoins; you wouldn’t need cryptocurrencies. And it’s a hit through the proverbial arc.
A digital dollar, the argument goes, would be enough to wipe out cryptos. The implication seems to be that natural selection, for lack of a better term, would help a digital dollar win. Stablecoins, of course, could have an easier time on the Hill and with regulators, but only a little. After all, they have the advantage of being backed by something: cash, cash equivalents, and short-term treasury bills. But Powell’s comments that you “wouldn’t need” the stablecoins or cryptos imply that the functions of these digital offerings could be satisfied in one fell swoop.
But again: nature abhors a vacuum, as does the financial services industry. The digital dollar has been relatively slow in coming, as the Fed has always explored concepts and technology. The deep dives – in the form of articles and comments – which were due to begin in late summer have yet to be published. In the meantime, cryptos have proliferated. Bitcoin has been simply volatile, but at least some observers have claimed to use cryptos in daily trading. When it comes to stablecoins, recent research from PYMNTS has shown that 58% of multinational companies use at least one type of cryptocurrency. Of that tally, around 29% use stablecoins.
Read also: 58% of multinational companies use cryptocurrency
Now, the fact that there may not be an explicit ban on cryptos and stablecoins doesn’t mean that they might be a bit more difficult to use, so much so that they can’t find a wider place in commerce. As reported in this space last week, the Biden administration is looking at tighter stablecoin regulations – particularly in a “blueprint” document that could be released this month.
Read more: Stablecoins Under the Microscope as US Preps Digital Currency Framework
If regulators and the Fed decide to weigh in on cryptos (including stablecoins) while convincing users that digital dollars (officially backed by the U.S. Treasury) won’t face such uncertainties, it could be. ‘ensue that there would be a “theft” of the digital dollar.
After all, bitcoin is only a store of value in terms of concept – worth what someone pays for it. Stables backed by a range of assets may find that at least some assets are more “liquid” than others (commercial paper, for example, can be volatile because it is a non-debt instrument. guaranteed). We’ll find out more about what the Fed plans to do in the coming weeks – and how it plans to position the digital dollar, to the possible detriment of cryptos and stablecoins.