With the dollar about to enter the crypto era, the US government must soon announce more clearly how this is to happen. The material must consist of three documents. First, the Federal Reserve Board (Fed, the American central bank) should present a report on the American payments system later this month, to point out if there is feasibility for the issuance of a digital central bank currency (CBDC).
- Almost 5,000 cryptocurrencies were launched in one year
- El Salvador uses volcano energy to mine Bitcoins
- Tests with the Chinese digital currency have moved more than US$ 5.3 billion
Later, the Boston Fed will publish a survey on the technology that could underpin the digital dollar and its related open source program. This document can help establish technology standards for the creation of an American digital currency that can even be used for developing cryptocurrencies in other parts of the world — since integration with the American payments system is essential for the economy from many countries.
Finally, the president's working group on financial markets will present recommendations on how to regulate stablecoins. Stablecoin s are cryptocurrencies created by private companies that maintain a relatively stable price (usually linked to a commodity or currency or that have a supply regulated by an algorithm ).
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This material will guide the financial community to how the Fed and the Biden administration see the future crypto of the dollar, as well as how far they support the adoption of a digital currency and what protections they think are needed to defend individuals and investors. — since the market today is not yet regulated.
What was once a distant project has gained a sense of urgency as the value of digital assets has reached about $2 trillion. In addition, other countries, such as China, are already making progress in creating their national digital currencies. “That went from 'It's an interesting idea' a few years ago to 'We need a pilot project,'” says Josh Lipsky, director of the Atlantic Council's Geoeconomic Center.
Risks and benefits
In recent months, there have been discussions about whether creating a digital dollar is a wise decision. Randal Quarles, vice president for oversight at the Fed, says the benefits of this type of currency are unclear, but the risks are significant and concrete. At the same time, those in favor of creating a CBDC point out that it can speed up payments, reduce their cost and increase access to the financial system for individuals who are not banked.
A group of central banks (which includes the Fed, the Bank of England and the European Central Bank) has released a report that indicates that CBDCs can intensify bank runs by making withdrawals easier in a crisis. Furthermore, the creation of a CBDC could take years, so the Fed would prefer that the US Congress pass a law to authorize the issuance.
A Barclays Plc survey, presented in September, points out that the Fed would have a huge competitive advantage over private tokens if it had its own digital dollar. "With proper regulation, a Fed's CBDC can prevent the issuance of cryptocurrencies by private companies."
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