Tag: Digital currency

Where are we on the Dollar CBDC?

On By mehranmuslimiblogIn UncategorizedLeave a comment

The US dollar is a strong currency, and due to its dominant position in the market, it has been considering the introduction of a dollar Central Bank Digital Currency (CBDC).

The government has been closely studying this option, and it might take a while before the US finally joins the CBDC bandwagon. The implementation of a US dollar CBDC would have significant implications for both global financial stability and the US financial power.

The Federal Reserve is determined to strengthen the US dollar and is actively exploring various avenues to enhance its superiority.

The idea of launching a US-based CBDC originated in September 2022 when the White House released a framework discussing the regulation of digital assets. The Federal Reserve recognizes the innovation that digital assets bring as a form of money. However, they also acknowledge the associated risks that could leave customers vulnerable.

The primary objective of the CBDC is to offer people the option of a digital currency backed by the Federal Reserve. The decision to pursue a dollar CBDC will be influenced by long-term geostrategic positioning.

Lawmakers are currently deliberating whether a CBDC is a viable option or not. The Treasury recently confirmed that technological development of a CBDC is underway and should be subject to approval by policymakers.

The US digital dollar will function as a legal tender, and users will have the flexibility to convert it into other forms of central bank assets, such as fiat money or reserves. The CBDC will operate similarly to cryptocurrencies and stablecoins. The key motivation behind the digital dollar is to promote an inclusive financial system that can be accessed by unbanked populations and reduce transaction costs.

Despite the numerous advantages of the CBDC, the US dollar CBDC may destabilize private sector lending.

Nevertheless, the main goal of the CBDC is to complement fiat currencies issued by the central bank and be accessible to everyone, thereby offering a competitive payment system and fostering financial inclusion.

There are specific requirements that must be met before the US Federal Reserve officially launches the CBDC, including:

1. It must benefit US households, businesses, and the economy at large.

2. It must yield these benefits more effectively than traditional money.

3. It will complement, not replace, fiat currency.

4. It must protect consumer privacy.

5. It should receive support from critical stakeholders.

Advantages of CBDCs include:

● Facilitating cheap cross-border payments.

● Lowering transaction costs.

● Increasing financial inclusion.

● Providing the public with access to Central bank funds.

However, there are some disadvantages to consider as well:

● It may compromise the current safety and stability of the financial system.

● It may reduce the effectiveness of monetary policy implementation.

● Privacy and data protection issues are challenging to address.

● Operational resilience and cybersecurity may become problematic.

The development of CBDCs around the world is progressing, with 11 countries having already implemented CBDCs and up to 114 countries exploring the possibility. These 11 countries are primarily island nations like the Bahamas, Antigua, and Jamaica. The adoption and circulation of CBDCs will depend on the transparency of their development process.

China is already working on a CBDC that it believes will compete with the US dollar. They aim to create a digital Yuan that is secure, private, and interoperable. China’s digital Yuan has gained significant popularity in the market and appears to be poised for a strong position.

By the end of 2022, all G7 economies had considered the development of a CBDC. Countries like China, Canada, France, India, and South Korea are at the forefront of these efforts.

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Who will be Top Dog in Digital Currencies?

On By mehranmuslimiblogIn Bitcoin, cryptoLeave a comment

Digital currencies have been popping up like daisies over the last several years and there doesn’t seem to be an end to it. Some might say that it would be more accurate to compare them to weeds and that an awful lot of them need to be removed from the cryptocurrency environment.

It is certainly true that there are questions marks over the long-term survival of a significant number of them. Brad Garlinghouse, the Ripple CEO, thinks that around 99% of digital assets will “got to zero”. And there are many others who agree with him, even if they don’t put a precise figure on it.

Now the survival of what I might call the ‘smaller’ coins is even more in question, because central banks are moving into the digital asset arena with their own digital currency, and this will put a lot of pressure on all but the strongest cryptocurrencies.

Mati Greenspan, senior analyst at eToro remarked to Charles Bovaird at Forbes: “At the moment the three biggest currencies in the world are racing to make their fiat digital.” In this race, China is winning, because the European Central Bank and the Federal Reserve haven’t put in the effort to keep up. Then we add something like Libra into the mix and for a time it looked like Facebook’s digital coinage had the potential to threaten every other cryptocurrency,. Now, that project looks less certain to be such a major threat.

So what is the likely outcome? Some market observers believe that whatever happens, there won’t be a winner-take-all scenario. Jacob Eliosoff, a cryptocurrency fund manager thinks there will be around 100 widely used cryptocurrencies that will survive. Marouane Garcon, managing director of Amulet said, “There won’t be a single currency because of too many political differences in the world, but just like fiat currencies some will be stronger in value than others.”

Furthermore, bitcoin, which is currently the leading digital currency, may not be the ultimate winner, but it is likely to be in the winning group. Jake Yocom-Piatt from Decred had this to say: “Instead of a large amount of capital and attention spread across many currencies, we will increasingly see that same capital and attention spread across a smaller number of SOVs, leading to a corresponding increase in their value.”

Who do you think will win the race to be Top Dog in this race? The central bank coins, stablecoins like Libra, or bitcoin and its peers?

NYSE head backs digital currency survival

On By mehranmuslimiblogIn Bitcoin, BlockchainLeave a comment

Good news for cryptocurrency supporters from the New York Stock Exchange (NYSE) chairman, Jeffrey Sprecher. This week he expressed his optimism about the survival of digital currencies as an asset class, according to one business news outlet.

Sprecher, who also happens to be CEO of Intercontinental Exchange (ICE) was speaking at the Consensus Invest conference. He told the audience about how he reacts to press headlines like “Will digital assets survive?” and said that his unequivocal answer is yes. However,, when it comes to price he suggested that the NYSE was “agnostic” about that, meaning that it has no bias about what might happen as regards that.

Coincidentally, and rather tellingly, Sprecher was joined on stage at the conference by his wife, Kelly Loeffler, who happens to be the CEO of Bakkt, a cryptocurrency platform. Bakkt also happens to be owned by ICE and will launch next year.

Loeffler talked about what Bakkt will be offering, including the Bitcoin futures contract, saying, ““the Bakkt futures contract will help Bitcoin traders establish a trusted price. Bitcoin now trades at different prices on different exchanges, many of which are unregulated.”

Indeed, the NYSE and its parent company have been quite proactive in the digital currency sphere, which is encouraging for others involved in it. ICE has already partnered with Blockstream, a blockchain tech company to provide the big Wall Street investors, including hedge funds, with what it calls “disciplined” BTC pricing. To do this, it said it would pull data from 15 major exchanges.

A few months after this, ICE then said it would offer traders contracts that would result in customers owning Bitcoin. At the time it said, “ICE has had conversations with other financial institutions about setting up a new operation through which banks can buy a contract, known as a swap, that will end with the customer owning Bitcoin the next day — with the backing and security of the exchange.”

And at the same time as this Sprecher has made a supportive statement on cryptocurrency, it has been announced that an Association for Digital Asset Management (ADAM) has been created to produce a “code of conduct” for the digital currency sector. Among ADAM’s founding members are the former NYSE CEO, Duncan Niederauer, Galaxy Digital, a crypto merchant bank, BTIG, a global financial services firm, fintech firm Paxos and GSR, a crypto liquidity solutions provider.

Even if the markets are struggling to find their level, it seems apparent that slowly but surely the financial world is coming around to the idea that cryptocurrencies are here to stay.