Crypto’s Rise Could Change Fed’s Monetary Policy

John Williams, President and CEO of Federal Reserve Bank of New York, believes that the bank should monitor the changes in the cryptocurrency industry closely and, if necessary, update its financial policies. He said that central bank digital currencies (CBDCs), stablecoins, and central bank digital currency (Stabiloins) have a greater chance of success in the future monetary system.

The Fed should adapt to Crypto, as it is booming

Williams, like many central bankers is vocal in his criticism of the cryptocurrency industry. He argued in 2018 that digital assets did not pass the “test of what a currency should look like.” Furthermore, criminals could be able to use them for illicit purposes.

Williams seems to have softened his stance. The New York Fed President, John Williams, spoke out about the rapid growth of the asset class and the potential for it to transform the payment system. The Federal Reserve could therefore change its monetary guidelines. To provide investors with additional protection, the institution should establish a regulatory framework for the market.

“It is therefore crucial that we understand how these changes could impact the economy and financial system as well as the implementation of monetary policy and balance sheets at the central bank. We must also think carefully about the proper regulation in order to protect investors and consumers as well as ensure stability and safety within the financial system.

Williams also spoke about the various types of cryptocurrency. According to Williams, stablecoins are the most important because they are “fully backed with safe and liquid assets” and CBDCs. He said that although they carry some risks, both have the potential of strengthening the payment network.

An executive had predicted earlier this year that stablecoins would be very useful for cross-border payments. They need to be properly regulated before they can participate in these transactions.

The Launch of CBDC Could Be Stopped by Crypto’s Advance

Williams stated last summer that the Fed could face difficulties in releasing a digital currency if the cryptocurrency market grows. He advised the Federal Reserve and other central banks to become familiar with blockchain technology before they issue such a product.

“Before central bank like the Federal Reserve can emit their own CBDCs, many major questions pertaining blockchain technology and regulation must be addressed.”

Jerome Powell, Chairman of the US Federal Reserve, stated that the United States would not rush to create its digital currency and instead will be focused on the proper way.