Fed crypto

In a surprising development, a panel of speakers hosted by the U.S. Federal Reserve had on Tuesday gave a big boost for the cause of cryptocurrencies. They recommended that crypto assets be allowed to flourish in the U.S. economy as it would further strengthen the dollar’s status. The Fed cryptocurrencies discussion gave rise to some interesting observations.

Crypto Assets Could Help Strengthen Dollar

While the cryptocurrency ecosystem traverses through a historical low, the panel’s comments come as a welcome move for the crypto community. The big question in crypto traders mind is will crypto recover from the current lows in near future. The panel members said the usage of cryptocurrencies, especially the CBDCs, could strengthen U.S. dollar’s role in the international market. On the regulatory side, the services offered around crypto assets should be linked to the dollar, they suggested.

“Digital assets could actually reinforce the dollar’s role in the international market over the medium run. This could be done if new sets of services structured around these assets are linked to the dollar.”

Last month, Fed Chair Jerome Powell spoke about the rapid growth in cryptocurrencies and stablecoins. In light of the tremendous growth in crypto-assets and stablecoins, the Fed is examining the usage of CBDCs, he said.

The Fed is looking at whether a CBDC would improve on an already safe and efficient domestic payments system. As the Fed’s white paper notes, a U.S. CBDC could also potentially help maintain the dollar’s international standing, he added.

CBDCs Could Be Advantageous To U.S. Dollar

The panelists discussed questions such as whether certain technological aspects of digital assets could change the advantages of the dollar or reinforce its various roles. Technology by itself would not lead to drastic changes in the global currency ecosystem, the panelists stated.

Also, the Fed panel said the crypto ecosystem is currently centered around retail investors. The movement towards institutional investors is constrained by the lack of a regulatory framework, they added.

“The development of CBDCs has also tended to be focused on domestic retail sectors and thus is not a threat to the U.S. dollar’s international status.” The panelists acknowledged that the scope of cross-border CBDCs is still quite limited.

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