Crypto’s Rise Could Change Fed’s Monetary Policy, Says Top Bank Exec

John Williams, president and CEO of the Federal Reserve Bank of New York, believes that the institution should closely monitor changes in the cryptocurrency industry and, if necessary, make necessary updates on its financial policies. He also stated that stablecoins and central bank digital currencies[सीबीडीसी]has a better chance of succeeding in future monetary networks.

Crypto Is Booming, and the Fed Must Adapt

Like many other central bankers, Williams is an outspoken critic of the cryptocurrency sector. In 2018, he argued that digital assets do not pass the test of “what a currency should be”. Besides, criminals can use them in illegal activities, he claimed.

However, Williams seems to have softened his stance. In a recent statement, the New York Fed chairman outlined the asset class’s rapid growth and its potential to transform payment systems. As such, the Federal Reserve may change the way monetary guidelines operate. The institution should also seek to establish a regulatory framework on the market to provide further protection to investors:

“Therefore, it is important that we understand how these changes may affect the economy and the financial system, as well as monetary policy implementation and central bank balance sheets. In addition, we need to ensure the safety of consumers and investors and the stability of the financial system and Appropriate regulation must be carefully thought through to ensure safety.”

Williams touched on different types of cryptocurrencies. In his view, the most perspective are stablecoins that are “backed by fully secure and liquid assets,” and CBDCs. They both have the potential to strengthen the payment network despite having some risks, he added.

Earlier this year, the executive predicted that stablecoins could be highly useful in cross-border payments. However, they need to be properly regulated before participating in such transactions.

The Progress of Crypto Could Stop the Launch of a CBDC

Last summer, Williams claimed that the growth of the cryptocurrency sector could be an obstacle to the Fed’s ambition to issue a digital dollar. He urged the Federal Reserve and central banks to become familiar with blockchain technology and regulate the space before issuing such products:

“A number of key questions related to blockchain technology and regulation need to be addressed before a central bank such as the Federal Reserve can issue its own CBDC.”

Earlier, the chairman of the US Federal Reserve – Jerome Powell – assured that the United States will not rush to launch its own digital dollar, but will focus on doing it the right way.

Featured image courtesy of WJS