US Federal Reserve doesn't know what to think about Stable Coins

Updated: Jul 28, 2021

Where is this path leading us?

It's really not clear to the Fed how they can contain and control this Crypto Thing.

To keep this short, I inserted a snippet of the language that the think tank for the Fed uses as they ponder the impact of Global Stable Coins. ( GSC ). They develop their own models and assume in one scenario that no one but the US will use stable coins.

In a study to be released later (when?) they will analyze cross border payments and its impact on Fiat money. ( can you say Dollar?) The short of this is ; the US Fed is trying to get their head around Crypto Assets in general as they see widespread adoption and significant banking labor resources jumping ship to move to the crypto sector.

They are truly afraid that it will destabilize the Dollar and more so their reign as King of Money in the world. As if they did not have pressure already from the IMF and China , and the EU. I must admit that the Fed is a Stabilizing force in our economy and the world of commerce likes stability. But, at what price.

The Fed and many administrations and all the other ABC entities are not very transparent in their motives nor the future consequences of all the stimulus money they print. I hear what they say, but I see what they do.

Watch for further announcements about crypto from the Fed as they do their best to shape policy and even how you can use crypto. They even state that crypto is mainly used for its anonymous traits and criminal intent. They will do their darnedest to control the narrative and control all forms of money.

Here is a snippet of that study released by the Fed. and you can see the full paper here.

"The scenarios developed in this paper have a strict set of constraining assumptions that simplifies the analysis, but also abstracts the analytic outputs from a real-world scenario.4 Most importantly, we assume that the United States is the only country in the world, by restricting the demand for GSC to only U.S. customers and requiring that the GSC be backed solely by U.S. dollar assets. This allows us to explore some key financial sector implications of a GSC before introducing more complicated scenarios that include cross-border flows.5 In a forthcoming companion FEDS Note piece, we plan to relax these assumptions and explore the international dimensions of GSC adoption through a similar analytical lens. Other key assumptions in this analysis include that all GSC outstanding is 100 percent backed by safe assets, and the GSC instrument is non-remunerated. Within the confines of these assumptions, we have mapped out three scenarios that vary the funding source for the GSC and the investment target of GSC proceeds (i.e. the type of assets backing the GSC). Across our scenarios, the impact of on the size and composition of aggregate U.S. commercial bank balance sheets is highly dependent on the specific scenario, highlighting the variety of possible outcomes from widespread adoption of a GSC. One trend that is consistent in all the scenarios is a likely shift in deposits away from smaller banks. Potential changes in the demand for currency and reserves in our scenarios could also result in some minor changes to the size and composition of the Federal Reserve balance sheet. Notably, the changes to these financial sector balance sheets within our scenarios do not reduce the role of banks within the financial sector, nor the ability of the Federal Reserve to implement monetary policy."

So, What are your thoughts on how the Fed can mold and shape crypto into a pill they find easy to swallow?


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