Nathan Thompson, Bybit’s main technical writer, has shared with Cointelegraph en Español, his opinion about how beneficial a dollar CBDC would be for cryptocurrencies by strengthening private technological innovation tied to some stablecoins and preserving the US dollar’s status as the world’s dominant currency.
First of all, Thompson recalled that earlier this year, US President Joe Biden signed an executive order on cryptocurrencies, setting a deadline of 180 days for a series of reports on “the future of money” to be generated, noting that this could be a decisive measure for the financial future of the United States. United States, since according to him if the government is wrong, the dollar could lose its place as the world reserve currency.
For Thompson, it all depends on stablecoins, cryptocurrencies linked to real assets, usually the US dollar. “The top three dollar-pegged stablecoins currently have a combined market capitalization of over $140 billion, proving that they are the backbone of decentralized finance (DeFi). For cryptocurrency users, they are safe assets and, as most cryptocurrencies trade against stablecoins, they are an easy way to get in and out of investments,” said Thompson, who also stressed that the nightmare of a collapse of the stablecoins haunt regulators and crypto enthusiasts alike.
“Major stablecoin Tether (USDT) has been dogged by rumors of financial misconduct and we are all aware of the situation with algorithmic stablecoin UST. Regulators are especially concerned that the crypto equivalent of a bank run could spread and destabilize other markets.“, said.
In this regard, Thompson commented that the confidence inspired by a Federal Reserve central bank digital currency (CBDC) would be a boon to cryptocurrencies and the US government. “A cryptocurrency-compatible dollar would be a critical asset that could be used as a store of value, offer dollar ownership to unbanked people around the world, and provide a convenient way to move money between cryptocurrencies and traditional systems. Another benefit to the US dollar would be to become the reserve currency of the metaverse.”he added.
Preference for the Dollar
Secondly, Thompson mentioned that there are cryptocurrencies used around the world as well as “ramps” for currencies ranging from the Lao Kip to the Nigerian Naira. “In countries experiencing high inflation, the ability to buy dollar-backed stablecoins is invaluable, while wealthy nations are used to transacting in dollars. In short, the world has already voted for the reserve currency of cryptocurrencies, and it is the US dollar.”he stated.
That said, according to him, now it would be up to the United States government to step forward and offer the world “what it wants”: a stablecoin backed by the Federal Reserve itself. “If (the US government) misses this opportunity, it will cede the upper hand to competitors like China, which has already started building its Digital Yuan with, presumably, much less democratic oversight on important issues like privacy,” he argued.
“Although there is also a possibility that the world will consider going back to gold as a reserve currency,” he added.
Solution to financial risks
Likewise, Thompson pointed to the report published in January about the digital dollar, where the Federal Reserve Board identified some risks associated with current stablecoins, noting the following: “an American CBDC could mitigate some of these risks while supporting private sector innovation”.
“The report also noted the importance of a CBDC to preserve the dominant role of the US dollar internationally,” added Thompson.
“It’s a win-win for the US government. A Federal Reserve-backed CBDC stabilizes DeFi and crypto markets in general, and the US government maintains its status as a global reserve currency. But there could be a ghost in the party: commercial banks.said.
Likewise, He explained that if citizens turn to the digital dollar as a store of value and deposit their wealth in DeFi protocols, this could deplete bank reserves and increase the cost of lending. “As bank loans become more expensive, people will turn to regulated DeFi protocols for lending products and banks will suffer even more. It’s clear that banks need to transform so they don’t go the way of all the telcos in the 2000s.” emphasized.
“Banks that decide to evolve will be rewarded, according to a report from the New York Digital Investment Group (NYDIG) that has found strong demand for crypto banking services,” said Thompson, who also shared some of what was said in that report. “Our results suggest that more than 46 million Americans currently own Bitcoin. That’s more than 22% of adults over the age of 18. The data shows that not only would consumers feel more comfortable buying and holding their Bitcoin with a bank, but they want bigger opportunities.
In closing, Thompson said that as the United States defines its crypto regulation policy, it must include plans to create a Fed-backed dollar stablecoin that can be easily traded on crypto markets. Also that if it doesn’t step up and lead the way, there are plenty of competitors willing to take its place as the global reserve currency.
Disclaimer: This material is intended as a commentary on economic or market conditions and does not constitute financial analysis or recommendation. The analysis and opinions set forth herein are those of Bybit’s chief technical writer and are in no way an investment recommendation, or necessarily the general opinion of Cointelegraph. Anyone, before investing, must carry out their own research and is responsible for their own decisions.
It may interest you:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.