US initiates 12-week test program for digital dollar tokens
Beginning with the steady decline of BTC and ETH, followed by the fall of Terra Luna and some notable lending platforms such as Celsius, all the way through the resounding collapse of the FTX exchange with its many ramifications, 2022 appears to be one of the worst years for the crypto market. On the other hand, governments all around the world are intensifying efforts to establish a regulatory framework for digital assets, which, in theory, should be a good thing for crypto coins, since this would open the floodgates for ETFs. However, the regulatory efforts also include the exploration of central bank digital currencies (CBDCs) that leverage blockchain power, but in essence would be the opposite of the decentralized and anonymous nature of Bitcoin. China has been testing a CBDC since April this year, and as of November 15, the US has initiated a trial period to determine the feasibility of a blockchain-based network connecting select banks.
Over the next 12 weeks, the Federal Reserve Bank of New York and its New York Innovation Center (NYIC) will collaborate with prestigious banks including BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo in order to test “the technical feasibility, legal viability, and business applicability of distributed ledger technology to settle the liabilities of regulated financial institutions through the transfer of central bank liabilities.”
Per von Zelowitz, Director of the New York Innovation Center explains that this proof-of-concept evaluation should provide valuable data regarding “asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve.” Even though the findings may eventually help establish a legal framework, the project itself is “not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a retail or wholesale CBDC.”
Stable coins issued by central banks can help combat fraud, yet, in the end, they still retain the centralized nature of FIAT currencies to which they blatantly add a mass surveillance component. It remains to be seen what sort of legal framework will be adopted for crypto currencies in the US, especially now when the fall of FTX seems to have created a perfect storm to ban crypto altogether. The EU and UK are also looking into CBDCs, but at least their regulatory efforts also appear to be favorable for crypto assets.
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