Share
Mortgages
Credit Cards
Loans
Insurance
Banking
Financial Goals
Follow Us
U.S. Crypto Regulation Talks Are Heating Up, With Three Major Themes Emerging. Here’s What They Mean for Investors
Crypto Rewards Are the Latest Credit Card Trend. But Are They A Good Idea?
6 Ways To Earn Free Crypto — And What You Should Know Before You Collect
Bitcoin Rises Above $46,000. Why Crypto Investors Shouldn’t Change a Thing
eToro Review 2021: Practice Crypto Trading, Plus Novel Social Features
Cryptocurrency Has Seen a Surge of Interest This Year. We Answered People’s Most-Googled Questions
Bitcoin Dropped Back Below $30,000 This Week — What Investors Should Make of Continued Volatility
Binance.US Review 2021: Low Fees, But Investors Should Take a Pass
This Week in Crypto: Infrastructure Bill Could Include New Crypto Regulation, SEC Chairman Warns of Crypto Scams, Bitcoin Surges Past $46,000
Gemini Review 2021: Easy for Beginners, Plus More Options for Experienced Investors
Share
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.
The U.S. government this week laid more groundwork for potential future cryptocurrency regulation.
Federal Reserve Chairman Jerome Powell spoke Wednesday, July 14 about the Fed’s interest in regulating stablecoins and the potential for a central bank digital currency (CBDC), while testifying before the U.S. House Committee on Financial Services.
Stablecoins (Tether and USD Coin, for example) are a category of cryptocurrencies that peg their value to an existing fiat currency, like the U.S. dollar. That helps stabilize their value, so they’re better suited for digital payments — unlike more volatile digital assets like Bitcoin. Ideally, these coins are underwritten by a reserve of the currency they’re tied to, but today there’s little official regulation enforcing that.  
Powell compared them to money market funds or bank deposits, which have a strong regulatory framework in the United States. “That doesn’t exist for stablecoins,” he said. “And if they’re going to be a significant part of the payments universe — which we don’t think crypto assets will be, but stablecoins might be —  then we need an appropriate regulatory framework, which frankly we don’t have.”  

What Does This Mean for Crypto Investors?

Experts we’ve spoken to largely agree that long-term crypto investors should stick with well-known cryptocurrencies like Bitcoin and Ethereum. Unless you’re doing more active trading — and are comfortable with the risks of buying lesser-known coins — the two most popular currencies are the best options for most people.
Regulation like what Powell is talking about is more likely to impact stablecoins and other smaller altcoins, experts say. “They have different use cases,” says Mike Uehlein, founder and financial planner at WealthU Advisors, referring to Bitcoin versus stablecoins. 
If Bitcoin is “digital gold,” stablecoins are more comparable to the current money system, he says, having an infinite supply and centralization. Bitcoin is a store of potential value, while stablecoins are better suited for digital transactions and converting digital assets to and from “real” money.
“Investors buying Bitcoin as a store of value and buying stablecoins for a store of value are two different things,” says Tyrone Ross, a financial advisor and CEO of Onramp Invest, a cryptocurrency platform for other financial advisors. A central bank-backed digital currency would be a market competitor for stablecoins, but not Bitcoin, Ross says. 
Still, any new regulation has potential to affect your portfolio. 
While stablecoin regulation or a CBDC may not have a direct effect on Bitcoin — which is decentralized and operated by users across the globe —  it is likely regulation could bring more volatility to the crypto market. Already, we’ve seen crackdowns on cryptocurrency regulation from China play a role in Bitcoin’s recent $30,000 price drop. We’ve also seen how the price of coins often follow each other — when Bitcoin’s price takes a hit, altcoins often follow. Regulation could eliminate many cryptocurrencies available today, Uehlein says. 
Still, the regulations Powell mentioned would likely have a much bigger impact on the value of stablecoins or smaller altcoins, rather than Bitcoin. “DeFi, stablecoins, and other things are ripe for regulatory scrutiny,” Ross says. “Don’t make large bets in the space now, and stay educated on recent developments and news.”

Why Regulate Stablecoins?

Because crypto trading and prices move very quickly, stablecoins can help traders move their funds within an exchange faster than if they were depositing cash from a bank account. Trading coins for actual dollars in and out of your bank account could take several days (and charge higher fees) than exchanging a coin for a stablecoin.
But without regulation, even these coins are risky. 
“Stablecoins are currently used as a replacement for the U.S. dollar, pegged 1:1 with the dollar,” Uehlein says. “Verifying this peg has been in question for many investors and regulators. Many investors would feel better knowing the dollars are backed by the U.S. treasury.” And that’s where a potential U.S. government-issued digital currency comes in — since it would have that backing.
Powell’s testimony also reiterated the Fed’s interest in a central bank digital currency for the United States. A CBDC would make it easier to make transactions digitally. Because it would (hypothetically) work on a blockchain network, those transactions would also be secure and much faster than money transfers are today. 
While it’s generally unwise to use crypto to make a purchase, that’s exactly the purpose a potential central bank digital currency could serve. “A fed-backed CBDC could replace stablecoins such as Tether or USDC,” Uehlein says. 
As far as any real implementation of a CBDC, both Fed officials and the experts we spoke to believe there’s a long way to go before we reach that point, at least in the United States. While he says he’s very interested in seeing how CBDCs in countries across the world continue to evolve, Uehlein says “it is too soon to tell how serious the U.S. is about a CBDC.”
Now, all eyes are on a coming report from the Federal Reserve, which Powell expects to publish around early September.
“We’re going to address digital payments broadly,” he told the committee. “So that means stablecoins, it means crypto assets, it means CBDC. That whole group of issues and payment mechanisms, which we think we’re really at a critical point in terms of the appropriate regulation.” 
In addition, the Fed plans to ask the public about the risks and benefits of cryptocurrency and a potential CBDC, alongside consultation with national groups, including Congress. The purpose of the report, Powell said, is “to lay out the possible potential benefits and also the potential risks” of a central bank digital currency, and how regulators might weigh those costs and benefits. 
How Soccer World Champion Jessica McDonald Juggles Her Career, Motherhood, and Fighting for Equal Pay
Apple Credit Card Review: Good for Apple Users and Mobile Wallet Spending
Sebonic Financial Mortgage Review 2021: Interactive Website, but Must Call for Rates and Fees
American Express Green Card: 3X Rewards and Annual Credits Toward Travel
A Home Equity Loan For Debt Consolidation: Comparing the Pros, Cons, and Alternatives
Learn all about finances in next to no time with our weekly newsletter.
In your inbox every Tuesday
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Facebook
Twitter
Instagram
LinkedIn
YouTube
Taxes
5 min read
Investing
5 min read
Chase
5 min read
Card Comparisons
7 min read
At NextAdvisor we’re firm believers in transparency and editorial independence. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by our partners. We do not cover every offer on the market. Editorial content from NextAdvisor is separate from TIME editorial content and is created by a different team of writers and editors.
Subscribe to our newsletter
Thanks for signing up!
We’ll see you in your inbox soon.
I would like to subscribe to the NextAdvisor newsletter. See privacy policy
Follow us

source

Por redditxxx

Deja una respuesta

Tu dirección de correo electrónico no será publicada.