Biden’s new Fed could be a boon for crypto, experts say

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Investors are focused on what the renaming of Federal Reserve Chairman Jerome Powell means for interest rates, experts say, but the upcoming personnel change at the central bank will be just as important for the crypto industry, experts say. Is said.

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President Biden’s nomination of Governor Lyle Brainard for the role of Fed vice chair, as well as a promise to nominate progressives to fill three more board vacancies in the coming weeks, are good news for those who want the Fed to become a digital dollar. wish to issue. Owen Tedford, research analyst at Beacon Policy Advisors.

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“All the comments we’ve seen from Brainard versus his Republican allies have far more to do with the digital dollar,” he told Businesshala. “You add three more Democratic governors and it moves things in their direction.”

brainard Said in May’s speech Several factors, including the development of a private digital currency such as bitcoin BTCUSD,
-1.77%,
The growing use of digital payments and foreign experiments with central bank digital currency are “accelerating the focus” at the Fed on a potential digital dollar.

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“It is very difficult for me to imagine that the US, given the dollar’s position as a major currency in international payments, would not come to the table with a similar offer in that circumstance,” she said in the comments. for the National Association for Business Economics in September.

His embrace of the central bank digital currency is in stark contrast to his fellow governor, Donald Trump-appointed Christopher Waller, who called a digital dollar “a solution in search of a problem” in a speech at the American Enterprise Institute in August.

But with three vacancies to fill on the Fed’s seven-member board, President Biden has the potential to turn a central bank into another subsidiary of a central bank digital currency.

A leading candidate for the board seat is Sarah Bloom Ruskin, in whose favor it is written A digital dollar as a potential tool for disbursement of federal aid funds in the wake of the COVID-19 recession. Another potential nominee, Federal Reserve Bank of Atlanta President Rafael Bostik. written About central bank digital currency as a potential tool in promoting financial inclusion.

The Fed will also be a key player in regulating the relationship of traditional financial institutions with digital assets. On Tuesday, the central bank, in coordination with Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency, said it plans to “provide more clarity” on how banks can handle digital assets.

in a joint statement, regulators promised new guidance on whether and how banks can provide crypto-asset safekeeping and custody services, facilitating customer crypto transactions, loans backed by crypto assets and how digital assets on bank balance sheets will be treated.

Acting Comptroller of the Currency Michael Hsu said in a speech last week that federal banking regulators are “approaching crypto activities very carefully, with a high degree of caution,” but that strict regulation of banks’ relationships with digital assets has been made for crypto. is not necessarily. At long last, Beacon’s Tedford said.

“There is going to be a pro-regulation environment, including crypto,” he said. “It is bullish in the long term because it is legit, but I could see it as bearish in the short term.”

Jonathan McCollum, who runs the government relations practice at law firm Davidoff Hutcher and Citroen, said in an interview that there is potential for tighter regulation of crypto, but he agreed that it could set the stage for continued growth in the industry.

“Now that Biden has nominated Powell, I think we are waiting for some more,” he told Businesshala. “The SEC has weighed in, the Treasury has released its report on stablecoins, all these things are coming together.”

The Fed has promised that it will issue a discussion paper on the benefits and risks associated with issuing a digital dollar, but its release has been delayed, reportedly due to a split in the Fed over the idea.

McCollum, who represents E-Currency, a company that provides central banks with the technology to issue digital currency, said that his conversations with lawmakers indicate that he is not aware of the usefulness of cryptocurrencies. is learning more and believes it will ultimately support the legislation the Fed gives. Treasury authority to issue digital dollars.

“I think we’re going to see some movement soon,” he said. “There is a lot of support on the House Financial Services Committee and the Senate Banking Committee and we expect there will be some legislation to update currency laws.”

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