John Williams – President and CEO of the Federal Reserve Bank of New York – believes the institution should closely monitor the transformations of the cryptocurrency industry and, if needed, make necessary updates on its financial policies. He also opined that stablecoins and central bank digital currencies (CBDCs) have a better chance of succeeding in the future monetary network.
Similar to many other central bankers, Williams is a vocal critic of the cryptocurrency sector. In 2018, he argued that digital assets do not “pass the test of what a currency should be.” Moreover, criminals could use them in illicit activities, he claimed.
However, it seems like Williams has softened his stance. In a recent statement, the New York Fed President outlined the rapid development of the asset class and its potential to transform the payment system. As such, the Federal Reserve could change the way it conducts monetary guidelines. The institution should also seek to establish a regulatory framework on the market to grant further protection to investors:
“Therefore, it’s critical that we understand how these transformations could affect the economy and the financial system, as well as monetary policy implementation and central bank balance sheets. In addition, we must think carefully about proper regulation to protect consumers and investors and ensure the stability and safety of the financial system.”
Williams touched upon the different types of cryptocurrencies. In his view, the most perspective ones are the stablecoins which are “fully backed by safe and liquid assets,” and CBDCs. Despite posing some risks, they both have the potential to strengthen the payment network, he added.
Earlier this year, the executive predicted that stablecoins could be highly useful in cross-border payments. However, they need to get properly regulated before taking part in such transactions.
Last summer, Williams claimed that the growth of the cryptocurrency sector could be an obstacle to the Fed’s ambitions to release a digital dollar. He urged the Federal Reserve and central banks to get familiar with blockchain technology and how to regulate the space before issuing such a product:
“Before central banks like the Federal Reserve can issue their own CBDC, several major questions pertaining to blockchain technology and regulation need to be addressed.”
Prior to that, the US Federal Reserve Chairman – Jerome Powell – assured that the United States will not rush to launch its digital dollar but will focus on doing it the right way.
Featured Image Courtesy of WJS
