Where just a handful of years ago, the idea would have been immediately dismissed or even met with ridicule, the United States Federal Reserve is now taking the concept of an official dollar stablecoin seriously.
Markets have heard more frequent guidance from the Fed on cryptocurrencies in recent years, and thanks to two curious U.S. representatives — French Hill and Bill Foster — this guidance now includes an enlightening response from Fed Chairman Jay Powell to their letter on a central bank digital currency, or CBDC.
Evolving trends force regulators’ hands
The infiltration of blockchain into our global financial sector is nothing new, but a few trends have seen these experimental decentralized solutions tackled head-on by authorities. One of the most significant events to bring about this pivot is that the first major economy has emerged as a proponent of government-issued stablecoins.
China’s announcement that it will launch a digital currency reveals the country’s direction, and other federal banks must now consider doing the same, especially during the ongoing trade war that is testing the standalone strength of individual economies and their monetary policy.
Facebook’s Libra is another sign that cannot go ignored, and though the Libra Foundation just experienced an exodus of backers, its underlying idea is enough to represent a bucket of cold water tossed on slumbering regulators and policymakers.
If governments don’t move first to permit immutable cryptocurrency transactions for their own digital coins, private corporations are ready to pounce. Likely on high alert thanks to China’s abrupt change in stance on cryptocurrencies, Powell provided fresh, tangible insights on how the U.S. regards this developing movement in his recent letter.
“The Fed has realized that cryptocurrencies, in one form or another, are here to stay,” says Saga’s chief economist, Barry Topf…