The Partnership Between The Fed and Crypto:
The Fed meeting and crypto have been two of the most
talked-about topics in the world over the past few months. There’s been much
debate about whether or not the two would eventually intertwine, and after the
Fed’s latest meeting, it looks like things are about to change. Here’s why we
could see crypto and fed hybrid in the future, what it would
mean for each party involved, and how you can prepare if this happens to your
business or favourite coin.
What is FED?
FED, or Federal Reserve System, is a central bank that has the power to print
money, regulate banks, and oversee fiscal policy. They play a major role in the
United States economy. The FED has three goals for the economy: full employment,
price stability, and moderate long-term interest rates.
It is not an agency of the government; it is independent. Its 12 voting members
are appointed by the President with Senate confirmation. They serve 14-year
terms and can be reappointed with the consent of Congress. In order to meet its
objectives, they have tools like raising or lowering the federal funds rate
which affects interest rates across the country. The Board also seeks to promote
maximum employment, stable prices, and moderate long-term interest rates.
FED Chairman Jerome Powell was sworn in on Feb 5th 2018 after being confirmed by
Congress with 16 yes votes and 0 no votes. He replaced Janet Yellen who served
as chairman from 2014-2018 after Ben Bernanke’s second term ended (Janet Yellen
had been Vice Chair of the Board since 2010). Under Powell’s leadership, he will
work closely with U.S Treasury Secretary Steven Mnuchin who advises Trump on
economic issues related to currency value, debt management and banking
regulation/supervision among other things.
What is crypto?
Cryptocurrency, a term that has been tossed around loosely without a clear
definition, is becoming an increasingly popular topic of discussion. It can be
defined as a digital asset designed to work as a medium of exchange using
cryptography to secure transactions, control the creation of additional units,
and verify the transfer of assets. Bitcoin is one example. Blockchain technology
is what allows cryptocurrency to be decentralized meaning it isn’t controlled by
one centralized entity. This means that blockchain technology cannot be shut
down or interfered with because it doesn’t belong to any individual or
organization. For this reason, many countries are taking a second look at crypto
as a potential solution for their economic woes. While some believe that crypto
is going to replace fiat currency altogether and usher in a new era of global
financial stability, others see it as just another fad waiting to die out. What
if the latter turns out to be true? The United States Federal Reserve Bank may
have just found its best match made in heaven.
Why does it make sense for fed and crypto to work
The Fed meeting and crypto are two of the most powerful forces
in the world. While they are both influential, they operate separately from one
another with different goals. However, there’s no evidence that these two
entities can work together to create a more efficient financial system. For
example, crypto could be used as a means for banks to move money around
internationally at cheaper rates than if they were using wire transfers or
SWIFT. Banks would use crypto for international transactions because it’s
secure, fast-paced, and cost-effective; all three of which are important factors
when doing business internationally.
What does the future hold for this alliance?
The future is uncertain. However, the alliance between crypto and
Fed may be beneficial for both, especially if legislation comes into
play. Crypto needs help to legitimize it as a legitimate financial tool – this
would give validity to crypto while also giving the U.S. economy more room to
grow by finding new ways to invest funds that are not yet invested in the market
(which will help drive up economic growth). Crypto can provide some of these
opportunities. With blockchain-based currencies like Bitcoin or Ethereum, there
is no need for a third-party intermediary or regulatory agency such as the Fed.
Crypto transactions occur peer-to-peer, which reduces costs and increases
efficiency because there is less opportunity for error when completing
transactions on an immutable ledger. As the crypto markets continue to expand,
they offer the Fed opportunities to tap into trillions of dollars in transaction
volume without having any regulatory involvement whatsoever with those assets.
Do you agree with this partnership?
The partnership between fed and crypto is not a match made in
heaven, but rather a marriage of convenience. The crypto market is volatile,
with Bitcoin losing almost 70% of its value over the last six months. The crypto
market is also largely unregulated, making it appealing to those who wish to
avoid regulatory scrutiny. Nevertheless, there are some benefits to this
partnership. Cryptocurrency could be an attractive way for the Federal Reserve
to conduct monetary policy because it has been difficult for the Federal Reserve
to assess the aggregate impact that their decisions have on the economy without
having a clear measure of inflation rates or economic output. For example, if
cryptocurrencies are widely adopted as payment systems, they may help provide
more accurate measures of economic activity and inflation. In addition, both the
crypto community and the Federal Reserve share a common goal of achieving
financial inclusion by enabling low-income individuals to participate in the
Fed and crypto are two of the most revolutionary innovations of
our time. The crypto market is still new, but the Federal Reserve has been
around for over a century. These two concepts have never been compared before,
but we can see that they work well together. It seems that crypto can be a good
investment for those who already own some crypto or want to build wealth more
quickly than through more traditional means like stocks.