The US Federal Reserve has announced that Central Bank digital currencies will not lead to radical changes in the international monetary system, so they do not threaten the status of the US dollar.
At a conference hosted by the Fed, market researchers and experts discussed factors that could influence the future dominance of the US dollar, including the role of payment systems and emerging technologies. Participants were MIT Research Fellow Neha Narula, Head of Research at the Bank for International Settlements (BIS) Hyun Song Shin, Head of Investment at Bridgewater hedge fund Rebecca Patterson, and Director HSBC’s Foreign Exchange Research Department, Paul Mackel.
The specialists came to the conclusion that the launch and implementation of state stablecoins outside the United States does not pose a threat to the dollar, since the blockchain technology, on the basis of which the digital currencies of central banks operate, will not be able to radically change the existing monetary system. In addition, when developing CBDCs by other central banks, regulators are focusing on improving the domestic retail market.
The possibilities of digital currencies of the Central Bank for making cross-border payments are still limited, the Fed states. This once again proves the absence of risks for the US dollar, since it still accounts for the majority of international financial transactions.
However, the cryptocurrency market is dominated by speculative retail investors as the adoption of crypto assets by institutional investors is limited by the lack of a regulatory framework to regulate. Fed financial research adviser Asani Sarkar and financial science professor Jiakai Chen believe that the demand for cryptocurrencies, especially bitcoin, is partly driven by people’s desire to avoid government control over personal finances. On the other hand, stablecoins pegged to the US dollar could strengthen its role as the dominant reserve currency.
In June, the Fed’s Board of Directors said that stablecoins that are under-backed by liquid assets and do not meet regulatory standards pose risks to investors and the entire financial system. First of all, it was about the Terra project, which crashed in May. And yet, Fed Chairman Jerome Powell has become more loyal to stablecoins. At the beginning of the year, he said that they could be used alongside the government’s digital currency.
Source: Bits
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