{"id":397281,"date":"2022-01-21T19:41:00","date_gmt":"2022-01-21T16:41:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/"},"modified":"2022-01-21T19:41:00","modified_gmt":"2022-01-21T16:41:00","slug":"does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/","title":{"rendered":"# Does a Fed digital dollar leave any room for crypto stablecoins?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a28c803a042b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a28c803a042b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/#Distinct_purposes\" >Distinct purposes?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/#A_change_of_heart\" >A change of heart?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/#Subverting_monetary_policy\" >Subverting monetary policy?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\/#%E2%80%9CRetail_banker_for_America%E2%80%9D\" >\u201cRetail banker for America?\u201d<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Does a Fed digital dollar leave any room for crypto stablecoins? <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDEvZjE1MjhmNDktMzM5ZC00MjcxLWExZDYtYWYwZWIyZDE3M2Y4LmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-128018ef>During Jerome Powell\u2019s Jan. 11 United States Senate confirmation hearings, Sen. Patrick Toomey posed a question to the incumbent-and-future Federal Reserve chief:\u00a0\u201cIf Congress were to authorize and the Fed were to pursue a central bank digital dollar, is there anything about that that ought to preclude a well-regulated privately-issued stablecoin from co-existing with a central bank digital dollar?\u201d<\/p>\n<p>\u201cNo. Not at all,\u201d the central banker answered \u2014 a response that surely brought some relief to the crypto community. At least the Fed wasn\u2019t seeking to ban stablecoins. That bullet had <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>arently been dodged.<\/p>\n<p>But, Toomey raised a significant and abiding question: Can stablecoins and a Federal Reserve digital dollar really coexist? If individual Americans were to have retail accounts with the Federal Reserve \u2014 as Toomey posited in what may have been an exaggerated scenario \u2014 \u201cand the Fed becomes the retail banker to America,\u201d why does one even need stablecoins? Or traditional retail banks for that matter? <\/p>\n<p>Indeed, in a discussion paper released on Jan 20, the Fed cited various potential risks associated with a digital dollar, including that a CBDC could effectively replace commercial bank money. That paper was aimed at eliciting public comment, while elsewhere the Fed has indicated no interest in rushing out a digital currency despite the efforts of other countries like China.<\/p>\n<p>Not all assumed the two could co-exist. \u201cA widely and easily accessible digital dollar would undercut the case for privately issued stablecoins,\u201d Eswar Prasad, professor of economics at Cornell University and author of the book, <em>The Future of Money<\/em>, told Cointelegraph, though \u201cstablecoins issued by major corporations could still have traction, particularly within those corporations\u2019 own commercial or financial ecosystems.\u201d <\/p>\n<p>Others envisioned separate and distinct use cases for stablecoin and central bank digital currencies, or CBDCs, a group that would include a future U.S. digital dollar. \u201cThere are definitely some distinct use cases for each,\u201d Darrell Duffie, Adams distinguished professor of management and professor of finance at Stanford University\u2019s Graduate School of Business, told Cointelegraph. \u201cFor example, the Fed is unlikely to give CBDC accounts to a wide spectrum of foreign consumers,\u201d and dollar-pegged stablecoins could be very useful for making cross-border payments and settlements \u2014 fulfilling a real business need, he suggested. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Distinct_purposes\"><\/span>Distinct purposes?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Would there, indeed, be distinct uses for a digital dollar and privately issued stablecoins \u2014 or are stablecoins likely to be superseded by CBDCs all around the world eventually? <\/p>\n<p>\u201cStablecoins are different from most CBDCs in their construct and purpose,\u201d Matt Higginson, a McKinsey partner who leads the consulting firm\u2019s global blockchain and digital assets initiatives, told Cointelegraph. CBDCs are usually intent on improving financial inclusion, reducing the cost of cash and, to some degree, tracking financial transactions (for Anti-Money Laundering purposes, for example). Stablecoins, by comparison, are dollar-pegged tokenized cash aimed at improving the speed and efficiency of payments. \u201cTheir premises are really quite different, so there is no reason they shouldn\u2019t co-exist,\u201d said Higginson.<\/p>\n<p>A digital dollar isn\u2019t really about <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> or efficiency, Jonas Gross, chairman of the Digital Euro Association, told Cointelegraph. As with CBDCs <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly, it \u201ccould be more efficient or stable for handling a high throughput of retail transactions, where DLT is not needed, or where people prefer the safety, soundness and interoperability of a central-bank backed currency.\u201d<\/p>\n<p>Stablecoins, in comparison, \u201cfocus on the technological aspects, allow efficient payments due to removing inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>ries and novel innovative business models,\u201d Gross said. The two could find different constituencies and could presumably co-exist. <\/p>\n<p>Some countries, too, might prefer to dollarize their economies with a USD stablecoin, Duffie added. \u201cAnd, some might get dollarized against the wishes of their central banks.\u201d Not all CBDCs need to be blockchain-based or based on digital ledger technology, either, as Duffie noted, further explaining:<\/p>\n<blockquote><p>\u201cSuppose a CBDC is not based on DLT, and we want to take advantage of smart contracting or other DLT applications, whether wholesale or retail. Stablecoins could serve a useful role there.\u201d<\/p><\/blockquote>\n<p>Even Prasad didn\u2019t rule out the possibility of coexistence: \u201cStablecoins and central bank digital currencies could be seen as complementary payment mechanisms, even if they might step on each other\u2019s toes in that function.\u201d <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_change_of_heart\"><\/span>A change of heart?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At his confirmation hearing, Powell appeared to be more kindly disposed toward cryptocurrencies than in July 2021 when he <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2021\/07\/16\/jerome-powell-promotes-cbdc-digital-dollar-warns-against-stablecoins.html\">told<\/a> lawmakers: \u201cYou wouldn\u2019t need stablecoins; you wouldn\u2019t need cryptocurrencies, if you had a digital U.S. currency,\u201d using that as an argument in favor of a Fed digital dollar. What might have prompted this sea change, assuming that\u2019s what it was? <\/p>\n<p>\u201cU.S. institutions, such as the Fed and regulators, seem to have understood that stablecoins can provide tremendous support for the U.S. dollar,\u201d opined Gross. Why? \u201cThe largest stablecoins are all backed by the U.S. dollar,\u201d and if they were to strengthen their position as a means of payment in the crypto space, \u201cthis means that the U.S. dollar gains in importance.\u201d<\/p>\n<p>Prasad had another take as the Fed chair\u2019s softer stance on stablecoins might be the result of \u201chim having taken comfort from actions under consideration by Congress and various regulatory agencies to bring such private cryptocurrencies under tighter regulatory oversight.\u201d <\/p>\n<h2><span class=\"ez-toc-section\" id=\"Subverting_monetary_policy\"><\/span>Subverting monetary policy?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Crypto critics have even suggested that popular stablecoins might eventually undercut traditional monetary policy operations. Are they right? \u201cIf denominated in U.S. dollars, with stability, I don\u2019t see a case that a stablecoins would undermine monetary policy transmissions,\u201d said Duffie, adding: \u201cActually, I would draw the opposite conclusion.\u201d<\/p>\n<p>Prasad differed: \u201cStablecoins that undermine the medium-of-exchange function of central bank money could add to already substantial uncertainties in the transmission of monetary policy to economic activity and inflation.\u201d<\/p>\n<p>Higginson, for his part, viewed the notion that stablecoins could affect monetary policies as misguided. \u201cStablecoins are almost fully reserved,\u201d which means a real dollar is set in reserve for almost every tokenized stablecoin dollar, he said, further telling Cointelegraph: <\/p>\n<blockquote><p>\u201cThe obvious conclusion to that is that it doesn\u2019t change monetary policy at all because you are not changing the supply of dollars in the economy.\u201d <\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"%E2%80%9CRetail_banker_for_America%E2%80%9D\"><\/span>\u201cRetail banker for America?\u201d<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Lastly, Sen. Toomey <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.c-span.org\/video\/?c4995591\/user-clip-sen-toomey-questions-j-powell-re-cbdc-stablecoins\">raised<\/a> a scenario during the confirmation hearings whereby \u201cindividual Americans [would] have retail accounts with the Fed, and the Fed becomes the retail banker for America.\u201d Both he and Powell agreed that this role would be well beyond the \u201chistory, expertise, experience or capabilities\u201d of the U.S. Federal Reserve. Still, is such a role unthinkable?<\/p>\n<p>\u201cHistorically, central banks have stayed away from having direct retail relationships,\u201d Higginson told Cointelegraph. \u201cThat\u2019s why our commercial banking system exists.\u201d Central banks rarely issue currency directly to consumers, for instance. <\/p>\n<p><strong><em>Related:\u00a0Early birds: U.S. legislators invested in crypto and their digital asset politics<\/em><\/strong><\/p>\n<p>Moreover, the properties of stablecoins are different from those of most current or projected CBDCs \u201cin that, stablecoins are being launched with this smart contract functionality that makes them programmable,\u201d continued Higginson. This opens possibilities for their use that go beyond what we think about in terms of a traditional central bank digital currency. <\/p>\n<p>Nevertheless, the idea of \u201cretail banker to America\u201d may not be so easily put to rest. A recent EY report, for example, summoned up the same circumstance \u2014 indeed, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/assets.ey.com\/content\/dam\/ey-sites\/ey-com\/en_gl\/topics\/banking-and-capital-markets\/ey-2022-global-regulatory-outlook-how-can-banking-regulation-keep-up-and-transformation-races-ahead.pdf\">describing<\/a> a CBDC that took consumer deposits as \u201can existential threat\u201d to financial services firms, including retail banks. Wrote EY: <\/p>\n<blockquote><p>\u201cIf customers can keep their money with a central bank, they have no need for a retail bank, and firms will see their interest rate margins contract precipitously.\u201d<\/p><\/blockquote>\n<p>Still, nothing is for sure. \u201cThe Presidents\u2019 Working Group Report on Stablecoins tells us that the path to the introduction of useful and compliant stablecoins is far from clear,\u201d said Duffie, concluding: \u201cLegislation may be needed, and that\u2019s not an easy or predictable matter.\u201d<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"law_decoded\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/does-a-fed-digital-dollar-leave-any-room-for-crypto-stablecoins\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Does a Fed digital dollar leave any room for crypto stablecoins? &#8221; During Jerome Powell\u2019s Jan. 11 United States Senate confirmation hearings, Sen. Patrick Toomey posed a question to the incumbent-and-future Federal Reserve chief:\u00a0\u201cIf Congress were to authorize and the Fed were to pursue a central bank digital dollar, is there anything about that&#8230;<\/p>\n","protected":false},"author":1,"featured_media":397282,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDEvZjE1MjhmNDktMzM5ZC00MjcxLWExZDYtYWYwZWIyZDE3M2Y4LmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[89665,76153,75493,70550,70934,67874],"class_list":["post-397281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-digital-dollar","tag-dollar","tag-stablecoin","tag-federal-reserve","tag-regulation","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/397281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=397281"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/397281\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/397282"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=397281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=397281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=397281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}