In February, Joe Biden’s government will release a directive on the Federal Reserve’s proposed digital dollar. The Fed is looking into the advantages and disadvantages of digital currencies.
While the executive order will symbolize the government’s approach to cryptocurrencies, federal agencies are already assessing the dangers and opportunities associated with digital assets. The directive grants the White House supervision authority, allowing them to develop policies and improve the regulation of digital assets.
The Role of Federal Agencies
Even though the crypto market is decentralized, regulation has remained a hot topic, with federal authorities playing a pivotal role in improving digital asset legislation. The Office of the Comptroller of the Currency (OCC), the United States Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) have recently produced letters, informal remarks, and rules to guide the crypto industry’s compliance with federal laws.
These agencies’ efforts are now without a leader and are not adequately coordinated. On the other hand, senior officials are still working on the order due to the US president in February. The order has given the Federal Reserve the power to examine the possibilities of a United States digital currency.
Apart from the adviser, who stepped down to guarantee impartiality because he owned bitcoin, the rest of the team knows nothing about crypto. Since none of the members has any prior experience with cryptocurrencies, objectivity will be increased while evaluating the risks and opportunities associated with digital assets.
Government-Backed Digital Currency
The administration is also tasked with examining the pros and cons of introducing a digital currency issued by the central bank. The administration has withheld a great deal of information on the CBDC while waiting for the Federal Reserve to assess the CBDC’s impact.
On January 20, the Federal Reserve released a discussion paper as a prologue. The report explored the benefits and drawbacks of introducing a digital currency in the United States. The document also highlighted 22 issues, which the Federal Reserve will pose to the public until May 20, 2022.
If the United States launches a digital currency, it will be the first among the major economies to accept CBDC. CBDC is being embraced by China and other countries, especially African countries. There are many concerns that this could threaten the US dollar’s hegemony in the global economy. Federal Reserve Chair Jerome Powell has stated that the US dollar is not in jeopardy as long as the world’s reserve currency is concerned.
Impact on the Crypto Market
The crypto market is witnessing a massive sell-off as investors prepare for strict federal policies. The U.S Federal Reserve has announced that it will stop its easing policies, which have begun to affect significant sectors, including real estate, stocks, and crypto. Bitcoin is currently selling at $37 000. The stock market has witnessed the worst week, and investors are looking forward to how the Fed policies will impact the market.
