Central bankers and traditional financial institutions around the world are gearing up for the last throw of the dice in central bank digital currencies (CBDCs). The heat on crypto intensifies.
Chairman Powell enters the fray
Finally, even Federal Reserve Chairman Jerome Powell has fanned the flames of impending regulations planned to snuff the life out of cryptocurrencies and especially DeFi (decentralised finance), as he spoke of “significant structural issues in the DeFi ecosystem in a speech hosted by the Banque de France on Tuesday.
Powell also broached the issue of central bank digital currencies (CBDCs) but avoided putting the weight of the Federal Reserve behind them as yet, saying that they were still at least a couple of years away and would have to be decided by the executive branch and congress before they could be rolled out to the public.
As a dig against the growth of DeFi Powell said in his speech on digital finance:
“The good news, I suppose, is that the interaction — from a financial stability standpoint — the interaction between the DeFi ecosystem and the traditional banking system and traditional financial system is not that large at this point.”
Good news indeed. If the interaction were large then it can be assumed that impending regulation might speed up and may contain even more suppresionary legislation.
Powell follows in the footsteps of other leaders of traditional finance organisations such as Christine Lagarde of the European Central Bank, and Agustín Carstens, Head of the Bank of International Settlements (BIS). All have constantly warned of the many perceived ills contained within crypto.
China opens the way
It might be noted that China also followed a similar path, although in China’s case, it wasn’t numbing regulation but an all-out ban on cryptocurrencies.
The Chinese leadership understood that in order for its own digital yuan to succeed it needed to completely squash cryptocurrencies, which would have provided competition to the complete control that can be wielded with CBDCs.
The power in Bitcoin
Cryptocurrencies such as Bitcoin are peer-to-peer, meaning that there are no intermediaries such as banks, brokerages, or indeed any other third party at all between the two individual wallets transacting.
This is incredibly powerful and gives the individual their own sovereign money which can’t be manipulated, controlled, or taken away by any centralised organisation.
Central bankers and government leaders know this, hence the worldwide barrage of negativity, aimed by mainstream media towards cryptocurrencies.
Crypto is building out an alternative
The cryptocurrency industry is certainly not perfect. Given the lack of decent and fair regulation, many bad actors have been allowed to flourish. However, there is also a vast swathe of entrepreneurial talent working hard within the space.
They are building out ecosystems that can be used by any individual regardless of race or religion and the sheer pace of technological advancement is leaving the traditional banking system for dead.
Granted that the world is probably not ready for a move into a relatively new and untested system, but this is likely to happen gradually, at least as long as the traditional financial system does not collapse in on itself.
Whether crypto can weather the storm of regulation designed by those from the financial agencies who have everything to gain by crypto’s demise is anybody’s guess. But should CBDCs fail, and they are only an extension of the current fiat currency system, then expect many to start hedging their future with Bitcoin. We are at the Fourth Turning, and our financial world is about to be turned upside down.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
