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Cryptocurrencies Face a Violent Push As US Fed Panel Gives Its Nod

06-Jul-2022 By: Shikha Jha
Cryptocurrencies Fac

Cryptocurrencies Face a Violent Push As US Fed Panel Gives Its Nod

A panel of speakers invited by the U.S. Federal Reserve on Tuesday offered a significant boost to the cause of cryptocurrencies, which was an unexpected outcome. In order to further boost the standing of the dollar, they advised allowing crypto assets to grow in the American economy. The Fed's consideration of cryptocurrencies led to some thought-provoking conclusions.

Crypto Assets Could Help Strengthen Dollar

The panel's remarks are a welcome step for the cryptocurrency community even if the cryptocurrency ecosystem is now experiencing a historical slump. The main concern in the minds of cryptocurrency traders is whether the market will soon rebound from its recent lows. The panelists argued that the use of cryptocurrencies, particularly CBDCs, might enhance the position of the US dollar on the global market. They recommended that, from a regulatory standpoint, services supplied in relation to crypto-assets be tied to the dollar.

Jerome Powell, the chairman of the Fed, discussed the explosive expansion of cryptocurrencies and stablecoins last month. He said that “the Fed is investigating the use of CBDCs in light of the enormous expansion of crypto-assets and stablecoins.”

The Fed is examining how a CBDC may enhance the currently secure and effective domestic payment system. He added that a U.S. CBDC may also assist preserve the dollar's status abroad, as noted in the Fed's white paper.

CBDCs Could Be Advantageous To U.S. Dollar

The panelists discussed issues including whether specific technical characteristics of digital assets may alter or strengthen the dollar's multiple functions. Later, the panelists agreed that technology wouldn't fundamentally alter the world's money environment by itself.

The Fed panel also noted that retail investors are now at the core of the cryptocurrency ecosystem. They said that the absence of a regulatory framework hinders the shift toward institutional investors.

The growth of CBDCs has furthermore tended to concentrate on domestic retail markets, which means it does not pose a threat to the U.S. dollar's standing as a reserve currency. The panelists agreed that there are still several limitations to the use of cross-border CBDCs.

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