Notes published by the United States Federal Reserve at a recently held conference found the majority of exports believe in the U.S. dollar central bank digital currency (CBDC) it will not drastically change the global currency ecosystem.
Panelists at the conference also agreed the development of CBDCs outside the U.S. does not threaten the status of the dollar, but the development of cryptocurrencies could change the role of the dollar around the world, with some saying that stablecoin could even enhance the role of the U.S. dollar globally. the dominant reserve currency.
The evaluation came from an expert panel at a June 16 and 17 conference held by the Federal Reserve on the “International Role of the U.S. Dollar” which was drafted into a record and published by The Fed on July 5. The conference was used to gain insights from policymakers, researchers, and market experts to understand “potential factors that could change the dominance of the U.S. dollar in the future” including new technologies and payment systems.
Discussions about the panel focusing on digital assets and whether the CBDC will provide benefits for the dollar, the panelists agreed that the basic technology will not “cause drastic changes in the global currency ecosystem”.
Speakers ing panel including director of digital currency initiatives at MIT, Neha Narula, head of research at the Bank of International Settlements, Hyun Song Shin, head of investment strategy at asset management firm Bridgewater, Rebecca Patterson and head of FX research at HSBC bank Paul Mackel.
The panelists agreed that factors such as market and political stability, along with market depth, are more important for a dominant reserve currency like the U.S. dollar if the Fed’s development outperforms the digital dollar.
At CBDC development by other countries it was also generally agreed by the panel to have a penchant for focusing more heavily on the country’s own domestic retail market, and therefore this was considered “not a threat to the international status of the U.S. dollar”.
The Federal Reserve noted the amount and scope of CBDC to make cross -border payments “Still quite limited”, indicating that the system is not yet a threat to the dollar, which accounts for the majority of international financial transactions by October 2021 record.
Focusing on cryptocurrencies, the panelists said further development of digital assets could change the international role of the dollar, but adoption by institutional investors was throttled by lack of a regulatory frameworkleaving the crypto market now to be dominated by speculative retail investors.
The other panel included Fed financial research adviser Asani Sarkar and finance professor Jiakai Chen, concluding that part of the crypto demand, particularly Bitcoin (BTC), driven by a desire to avoid control of domestic capital, by citing the price of BTC in China’s trade at a premium compared to other countries.
Despite this, the Fed said that the panelists do not see crypto as a threat to the global role of the dollar in the short term. Some even suggest in the “medium run” that crypto could strengthen the role of the dollar if “a new set of services arranged around the asset is tied to the dollar”, which may be a reference to stablecoinscryptocurrencies are pegged to the value of the fiat currency (usually USD.)
The advice from the panelists could help create a new spin on Federal Reserve membership.
Earlier, the Federal Reserve Board of governors said in June that stablecoin is not sufficiently supported by liquid assets and proper regulatory standards “creating risk for investors and potentially for the financial system” may indicate the collapse of the TerraUSD Classic (USTC).
Comments by the Board before Federal Reserve chairman Jerome Powell said the CBDC could “potentially help maintain the dollar’s international position”.