Federal Reserve Conference Hints Stablecoins Can Reinforce USD’s Status

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Altcoins
Federal Reserve Conference Hints Stablecoins Can Reinforce USD’s Status

The central bank-issued digital currencies did not convince panelists at the recently concluded Federal Reserve conference, and CBDC cannot alter the global currency arrangement.

The United States Federal Reserve recently held a high-level conference on the role of central bank digital currency (CBDC) in the global currency space. A published statement from the discussion revealed that the CBDC pegged to the U.S. dollar has no significant impact outside the United States.

However, panelists at the conference believe that cryptocurrencies could affect the dollar’s role in the global financial sector due to its decentralized structure.

CBDC Has No Benefits for the USD

The conference’s outcome was hosted by the Federal Reserve from June 26 to 17, with the theme “International Role of the U.S. Dollar.” The Fed published the assessment, which shows the opinions of experts and analysts as they discuss important issues.

Moreover, the conference aims to gain valuable insights from researchers and industry experts on factors that could hinder the USD in the future. The note from the conference indicates that emerging technologies and payment systems have the most impact on the future performance of the U.S. dollar.

On digital assets and CBDC, the panelists agree that central bank-issued digital currency will have little impact on the global currency. Regulators cannot completely control the CBDC because it is a digital currency.

However, the participants also agree that political stability, market depth, and stability are more critical for the USD’s performance than CBDC’s.

Panelists believe it cannot displace the dollar if CBDC from other countries can affect the global standing of the U.S. dollar. CBDC will only influence their countries’ retail markets and aid transactions rather than fight for dominance with the dollar.

According to the Federal Reserve, CBDCs have no cross-border scope for payment, and the USD was responsible for most international transactions in the previous year.

Cryptos Can Alter the USD’s International Status

The most interesting point from the conference note is the tendency of crypto-assets to displace the USD in cross-border transactions significantly. However, this is still hindered by the lack of a coherent regulatory framework.

The panelists point out that institutional investors are yet to fully dump their funds into the crypto market due to the absence of market guidelines. Retail investors are having a field day in the crypto industry, thus driving prices up on speculation.

According to Asani Sarkar, the Fed financial advisor, and professor Jiakai Chen, domestic capital control is the reason people desire to adopt cryptocurrency. The experts further revealed that the price of Bitcoin in China is trading at a premium compared to other countries.

Nevertheless, the conference note shows that panelists do not consider crypto assets a threat to the continued dominance of the USD in the short term. Some participants opined that cryptocurrencies might reinforce the status of the dollar in the medium term if they are linked to the dollar. This is likely a reference to stablecoins.

The outcome of the conference and the information collated might be what the Fed needs to reconsider some of its stances, especially on stablecoins.

Ifeanyi Egede

Ifeanyi Egede is an experienced and versatile writer and researcher. He has keen interest in blockchain technology, cryptocurrencies, NFTs, Web3, metaverse, fintech and emerging technologies. He has tons of published works both online and in the print media. He has close to a decade of writing experience. When he is not writing, he spends time with his lovely wife and kids.