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Stablecoins, not Cryptocurrency, are more relevant in the present financial regime
- Cryptocurrency will not replace fiat currency
- Stablecoins can become a part of the current monetary regime
- Stablecoin will have to be brought under some regulatory authority
Federal Reserve Chair Jerome Powell is hoping to create a digital currency by the U.S. Central bank. Powell said that the central bank’s release of a digital coin would negate the need for private alternatives such as cryptocurrencies and stable coins.
Cryptocurrency is gaining popularity because its numbers are finite. The number of Bitcoins in circulation increases by minuscule quantities, and this helps to maintain its values.
On Wednesday, Federal Reserve Chair Jerome Powell said that the surging inflation is a sign of recovery, and the inflation levels will remain high in the coming months before moderating. However, the actual cause of the double-digit inflation has been the relentless pumping of dollars to kick start a sagging economy hit by lockdowns and recession caused by the COVID-19 pandemic. In such a scenario, Cryptocurrency scores over other fiat currencies like Dollar, Pound, or Yuan.
However, Powell reiterated that there would not be any change in the Fed’s ultra-low-interest rate policies. Powell also blamed inflation on temporary factors, notably supply shortages and rising consumer demand, as pandemic-related business lockdowns are lifted. Once these factors settle down, things will become routine.
Federal Reserve Chair Jerome Powell was asked if the digital currency issued by the Fed will be an attractive alternative to having several cryptocurrencies or stable coins in the financial regime; Powell answered in affirmative.
During a hearing before the U.S. House of Representatives Financial Services Committee, Powell said that the argument offered for supporting digital currency is correct. The presence of Digital currency will negate the need for having stablecoins or cryptocurrencies.
Most nations have pilot projects where they are examining the feasibility of having a digital currency. China has already started the process, and other countries are also going to follow suit. Fed officials are also examining the digital payments process in a discussion paper that could be released in early September, Powell said. It will be a crucial step in deciding that it should issue its digital currency.
Stable coins could have a more significant role in the financial system.
However, Powell was skeptical about crypto assets becoming a significant payment vehicle in the U.S. He was more optimistic about stable coins and said that they would gain more traction in the coming times. He, however, emphasized the need for more regulations before stable coins could be afforded a more prominent role in the financial system.
Need for regulation for the cryptocurrency sector
Powell emphasized the need for regulation for the cryptocurrency sector. Powell said that a robust regulatory framework is in place for the current financial regime. There are regulations for the conduct of bank accounts, term deposits, or money market funds.
However, no such system exists for stable coins. Powell said he does not think that crypto assets will become a part of the present financial regime. However, he noted that stablecoins could become a part of the payments universe, and therefore there must be some appropriate regulatory framework in place.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
