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Howard Lutnick, CEO of Cantor Fitzgerald, believes that stablecoins pegged to the US dollar benefit the US economy.
Howard Lutnick stated that Tether and Circle are properly backed stablecoins, essential for the US economy, as they stimulate demand for US Treasury notes and do not pose a systemic risk to the world.
Fed Chairman Called the Need for Stablecoin Regulation
Earlier this year, dailycoin.com and cryptopolitan.com reported on a meeting held by House Democrats where the Fed chairman emphasized the need to regulate stablecoins behind closed doors.
The integration of digital currency highlights the need for regulation even further. CBDCs and stablecoins can cause significant systemic disruption in interest rate setting and the Federal Reserve’s balance sheet.
In a published study, the Federal Reserve examined the effects of digital currency integration. It noted that monetary policy adjustments may be necessary to prevent a decrease in lending and preserve economic stability.
Lutnick Does Entertain CBDCs
Lutnick is not a supporter of CBDCs and believes that China may regard a digital dollar as a spy wallet for Americans.
Howard Lutnick expressed his satisfaction that things are evolving for the better and becoming more ubiquitous. He opposed the concept of central bank digital currencies, stating that China could interpret it as an American spying tool.
Additionally, he predicted that the tokenization of financial assets will become more prevalent over the next decade. It will also benefit the economy as blockchain technology becomes more advanced and affordable.
CBDCs Can Help Attract Investors- FED
The study by the Federal Reserve, however, concluded that digital currencies with higher interest rates would attract more investors and discourage depositors from choosing traditional banks based on the similarities between stablecoins and CBDCs.
Although it may affect lending volumes, crypto is not considered a risk-defensive investment. As a result, the equilibrium interest rate is expected to decrease, and the central bank’s ability to respond to crises may be limited.
Another factor to consider is “narrow banks,” which compete with traditional commercial banks for deposits but do not offer loans. Suppose depositors choose these institutions due to their lower interest rates and simpler structure.
SEC chair Gary Gensler’s comments on asset tokenization may impact commercial banks’ lending capacity. However, major institutions like BlackRock, Brevan Howard, and KKR are planning to tokenize parts of their funds due to the potential of blockchain technology.
There are estimates that the tokenization market could reach $5 trillion by 2030, and a “tokenized hedge fund” has already generated billions of dollars with a 37% yield.
Summary
Howard Lutnick believes stablecoins are crucial for the US economy as they stimulate demand for US Treasury notes and don’t pose a systemic risk. However, the integration of digital currency highlights the need for regulation, as stablecoins and CBDCs have the potential to cause significant systemic disruption. Lutnick is satisfied with the current evolution of things and the increasing ubiquity of cryptocurrencies.
Disclaimer
The views and opinions stated by the author, or any people named in this article, are for informational purposes only. They do not establish financial, investment, or other advice. Investing in or trading in stocks, cryptos or related indexes comes with a risk of financial loss.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
