At the Federal Reserve’s first conference on the international role of the dollar, the prospect of a U.S. central bank digital currency did not seem particularly impressive to panelists.
According to a July 5 article about the June conference, the digital asset research council stated that the institution’s investment in cryptocurrencies is “limited by the lack of a framework”. juridical.” Meanwhile, CBDCs issued by the Fed – a particularly hot topic in Congress at the moment, or alternatives have not yet been accepted.
Delegates on the panel include Digital Currency Initiative Director at MIT, Neha Narula, head of research at the Bank of International Settlements, Hyun Song Shin, chief investment strategist at the company Bridgewater Asset Management, Rebecca Patterson and HSBC’s head of FX research Paul Mackel
Conference participants agreed that technology by itself will not lead to drastic changes in the global currency ecosystem, as other factors such as regulation, stability, network effects, etc. and market potential is critical to the advantage held by dominant currencies,” the Fed brief said.
It also helps to lower the risks that foreign currencies, especially the Chinese renminbi, or digital assets pose to the dollar internationally. The scope of CBDCs that cross national borders is still quite limited.
Even so, the Fed said panelists do not see cryptocurrencies as a threat to the global role of the dollar in the short term. Some have even suggested that cryptocurrencies could strengthen the role of the USD if “new sets of services in this area are linked to the USD. Among them, a likely reference is stablecoins, crypto-currencies pegged to fiat currencies.
The conference report points to research showing that a large market for Bitcoin stems from efforts to evade capital controls, especially China’s strict regime.
China’s ambitions for an international role in the renminbi have caused great concern among some policymakers in the US. This attracts a lot of international leveraged trading, in which the US dollar acts as the global reserve asset.
The digital yuan is the largest-scale CBDC in the world at present. However, it seems that the Central Bank of the country has also made efforts to make the CBDC able to compete with local payment platforms such as AliPay and WeChat Pay rather than foreign currencies so far.
Although CBDC has been implemented in many countries across continents around the world, in the US the regulations on this type of digital asset are still not really clear. In addition, the legal frameworks applicable to stablecoins have not been agreed upon in recent meetings of the Fed.