Federal Reserve Vice Chairwoman Lael Brainard testified earlier than a House committee on Thursday on the advantages and dangers of a CBDC, or central financial institution digital forex.
Last month, the U.S. Senate confirmed Brainard to be the Federal Reserve’s subsequent vice chair, sitting alongside Chair Jerome Powell. Terra (LUNA) latest crash nonetheless has regulators searching for stricter crypto sanctions after the stablecoin misplaced its peg, taking billions of buyers’ funds with it.
“The recent turmoil in crypto financial markets makes clear that the actions we take now – whether on the regulatory framework or a digital dollar – should be robust to the future evolution of the financial system,” she famous in her testimony.
The realities of stablecoins
She continued by emphasizing the “need for clear regulatory guardrails” following Terra’s implosion.
Since the debacle with UST, buyers have watched with bated breaths as Deus Finance’s DEI token misplaced its peg, whereas Tether (USDT) briefly traded for lower than $1 for just a few hours.
During her testimony, Brainard criticized the notion that stablecoins don’t share the identical protections as industrial financial institution cash, as having a lot of these protections “could reintroduce meaningful counterparty risk into the payments system.”
Is a U.S. CBDC the subsequent step ahead?
Brainard believes {that a} U.S. CBDC might in the future co-exist with stablecoins, which she instructed lawmakers through the Committee on Financial Services listening to.
She additionally instructed the House committee to think about the implications of the issuance or non-issuance of a Central Bank Digital Currency (CBDC), suggesting that if the Federal Reserve was going to proceed with a CBDC, it could choose a non-interest-bearing CBDC or restrict the quantity a person can maintain or spend.
“In some future circumstances, CBDC could coexist with and be complementary to stablecoins and commercial bank money by providing a safe central bank liability in the digital financial ecosystem, much like cash currently coexists with commercial bank money,” she instructed.
Speaking to potential danger mitigation, Brainard says that the U.S. CBDC may be “one potential way to ensure that people around the world who use the dollar can continue to rely on the strength and safety of the U. currency to transact and conduct business in the digital financial system.”
Terra’s future on the blockchain
Following Terra founder Do Kwon’s proposal to revive the blockchain by forking a brand new chain with out UST, the ecosystem is already hyped about what the way forward for Terra might appear like.
The proposal was voted for on Wednesday, which would come with new tokens granted to earlier UST and LUNA homeowners by way of an airdrop.
There are reviews of exchanges lining up to checklist the brand new token amid predictions {that a} worth spike is underway. Crypto change Huobi tweeted its assist for Luna 2.0 whereas OKX additionally indicated the identical forward of the airdrop.
However, Binance said coyly that it could be “working closely with the Terra team” to be certain that customers are handled pretty.
Andrew Thurman, content material head at Nansen believes that predictions of a worth spike are unfounded based mostly on the circulation of tokens. However, he believes that these predictions might change as phrase continues to journey. Many consultants declare that itemizing on a number of exchanges would additionally enhance its liquidity.
Amid the flurry of exercise across the community, the Terra founder denied reviews that he contacted 5 exchanges in Korea to checklist LUNA 2.0.
“Luna 2.0 will show the world just how truly dumb crypto gamblers really are,” Dogecoin founder Billy Markus tweeted.
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