The Federal Reserve of the United States, commonly known as the Fed, has lost its interest in the idea of national cryptocurrencies. With the value of Bitcoin skyrocketing last year, blockchain looked like the future, but in reality it was much more clamor than anything else, so now the Fed is abandoning the so-called Fedcoin idea.
While Christine Lagarde, the director of the International Monetary Fund (IMF) believes that digital currencies issued by central banks may be a good idea, the Fed does not agree. According to Lagarde, everyone wants a place in a new world without cash, so the central banks that would have come before could have an advantage.
However, the prolonged bear market after the explosion of the hype bubble has made people cautious. At the beginning it seemed that Bitcoin was a panacea for all kinds of economic problems. In 2018, however, it became clear that it had to be scalable to work better and that the future, well, was the future.
Bitcoin has struggled a lot and the Fed has abandoned the idea of the Fedcoin it's just another example of how the Bitcoin hype has become extinct and now only true believers and investors who are still able to make money are in the market to stay.
Kevin Wash, the former US Federal Reserve governor, who at the time was a candidate for the president of the Fed, told the media last year that Fedcoin It would be a great idea It would be a national currency based on the blockchain, just like the Venezuelan Petro, the only difference is that it would really work.
This new token should be digital, transparent and much more efficient than paper-based money. It was also said that it could give the powered access to some interesting but unconventional tools such as negative interest rates.
The Cryptos are not suitable for central banks, the Fed believes
While the Fed researchers have determined that the bank could easily create encrypted ones, the idea was not judged very good by them. This is mainly due to the fact that the structure of how cryptocurrencies work is full of elements considered important red flags.
For example, order forces should monitor well who is using the money for what, so creating a national crypt without creating measures to identify who uses money would basically be an invitation for all types of criminals. Furthermore, it would be hypocritical to tell banks to do so if their own government does not impose this kind of rules.
It has also been noted that when you remove the unauthorized ledger from the network, you only have one centralized digital currency and nothing more. Without this, you only have the blockchain coming because it is no longer a cryptocurrency.
Centralized money does not need a blockchain. In fact, even before the blockchain was created by Satoshi Nakamoto there was already technology for the creation of centralized digital money, so the blockchain does not make anything new here. All this combined with the "high operational risks" makes the idea not particularly good.
Lael Brainard, the governor of the Federal Reserve Board, has recently said that the central bank has issued crypts or centralized coins were not so good because the blockchain, which is located in the heart of the encrypted, is not really useful as a store of value, as the cryptos are simply too volatile.
Brainard was also worried about international cyber attacks and how the currency could hit the banks. The digital currency in the United States, he said, is already good and useful, so there's no need to use encrypted ones.