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The Federal Reserve to release paper on U.S. central bank cryptocurrency this summer

With China working towards a digital Yuan cryptocurrency, it appears that United States officials are considering a digital dollar. Here's what we know.

Captain Business

May 20, 2021 12:30 PM

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The cryptocurrency market has been extremely volatile in recent weeks with Bitcoin, Ethereum, and Dogecoin experiencing huge selloffs, followed by a rebound in coin prices. Federal Reserve Chairman Jerome Powell issued a statement and video today announcing a paper will be published this summer regarding the Fed's take on central bank digital currency. Today's press release doesn't confirm a US Dollar cryptocurrency is coming, but it is a signal that the Federal Reserve is considering the future of money in the United States.

Here's the full transcript of Federal Reserve Chairman Jerome Powell's statement on digital currency:

The effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers that allow money to flow on a daily basis. Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation. In the Fed’s early days, the development of dedicated telegraph wires facilitated the transfer of funds between banks. In the 1980s, automated clearinghouse services made it possible for electronic bill payments to be an alternative to paper checks. In 2019, the Federal Reserve committed to building the FedNow Service, which will enable banks to provide real-time, or instant, payments to their customers around the clock, 365 days a year, benefiting communities across America.

Recently, the rise of distributed ledger technology, which offers a new approach to recording ownership of assets, has allowed for the creation of a range of new financial products and services—including cryptocurrencies. To date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value. Nonetheless, coins tied to the value of the dollar or another currency—known as “stablecoins”— have emerged as a new way to make payments. These stablecoins aim to use new technologies in a way that has the potential to enhance payments efficiency, speed up settlement flows, and reduce end-user costs—but they may also carry potential risks to those users and to the broader financial system. For example, although the value of a stablecoin may be tied to the value of a
dollar, these coins may not come with the same protections as traditional means of payment, such as physical currency or the deposits in your bank account. Therefore, as stablecoins’ use increases, so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries.

With news that China is exploring a digital yuan cryptocurrency, it makes sense to see the United States investigate a digital dollar. The upcoming Federal Reserve research paper is a good first step for the country, as some currency traders have suggested that the US Dollar is at risk of losing its global reserve currency status. As with most things the United States government does, this may be too late. The existing decentralized finance (DeFi) movement is well underway with massive market capitalizations for Bitcoin, Ethereum, and even Dogecoin.

Dogecoin is one of the best performing assets in the last year.

Perhaps a central bank digital currency (CBDC) will be less volatile than its DeFi counterparts, but it is all too early to speculate. Today's press release is not a confirmation of an upcoming US Dollar-based digital cryptocurrency, and the Fed clearly doesn't have the dank meme experience needed to launch a digital currency in the 2020s.

What do you think of cryptocurrency? Do you hate these articles? Do you love them? Would you buy a digital dollar cryptocurrency issued by the Federal Reserve? Let us know in the comments section. It makes us very happy to hear back from our users.

Captain Business

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Shacknews

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May 20, 2021 12:30 PM

Captain Business posted a new article, The Federal Reserve to release paper on U.S. central bank cryptocurrency this summer
- shirif
  
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  May 20, 2021 12:31 PM
  
  Y'all done made JPow mad