The Government Is Ending Stablecoins

The federal reserve just said we won't need cryptocurrency by September, the government is making their own.

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The Federal Reserve chairman just said we don’t need Bitcoin, we don’t need Ethereum, all these cryptocurrencies are failed payment systems. They also said stable coins need to be regulated, the government is working on their own version and we will know more by September. There’s a lot to unpack there so I want to break it down and explain what all that means for the future of money, cryptocurrency and stable coins.

WHAT IS A CBDC?

Central bank digital currency. The government is working on their own, and they are working on regulating the stable coin market.

WHY DOES THE GOVERNMENT WANT TO CREATE FED COIN?

Our current payment system is not digital. When we send money to each other, it happens in 3 phases: phase 1 is called the execution phase between buyers and sellers, then trades go through clearing which is phase 2 where those transactions are then recorded to a ledger, followed by phase 3 which is the actual settlement where we exchange money. This means we can't send money on the weekends, and we get problems like Robinhood shutting down trades.

WHAT DID THE FED SAY ABOUT BITCOIN?

Jerome Powell said cryptocurrencies are failed payment systems but stablecoins need to be regulated. There are upsides for creating a stablecoin like instant payments, but there are huge downsides and risks.

WHAT ARE THE RISKS?

85% of central banks around the world are now considering creating their own stable coin pegged to their native currency. If the Fed is papa bank then banks like Citi, Chase, US Bank are all teenagers of the Fed and they don't behave.

Stablecoins are not currently regulated and if we let banks integrate them into their financial system, we would have a lot of unregulated banking which would lead to problems like Wells Fargo (creating millions of accounts, credit cards, predatory lending, etc.) The Fed wants oversight.

WHAT DOES THE GOVERNMENT WANT NOW?

The government wants the CBDC and they want regulation fast.

HOW DOES THIS AFFECT BITCOIN AND CRYPTO?

If Jerome Powell and the fed decide to end stable coins or regulate them in a way that makes them useless, then that would be very bad news. No one knows how they’re going to regulate it, maybe they’ll allow current stable coins to exist or maybe they won't. There are pros and cons.

Pros:

This could be a good thing in rebuilding the market because it would give a lot more stability to the crypto markets. People would trust crypto more because they feel the government is helping guide it. And with the new confidence we could finally have our ETFs

Downside:

The downside is that it would give the government that much more power and control over money because that will be how we’ll phase out cash and there’s going to be a lot less privacy.

3-5 YEAR PREDICTION:

Tech companies will create their own stable coins (Facebook is working on one now called Diem) this is before the government can create theirs because corporations always move faster than the government. When they do, we will see more stability in the market, we’ll have even more liquidity especially if other companies decide to compete with Facebook, companies like Apple or maybe even Tesla.

At which point banks may start accepting these stable coins as a means of exchange. At which point the Fed will start to get really worried and they'll be forced to regulate or release their own "superior" version.

At which point other countries will create their stable coins to compete with the US, countries like China and the digital Yuan, Russia with the crypto Ruble, the UK with the crypto pound and on and on which will create even more on and off ramps for people to get into crypto space and people that are already invested in cryptocurrencies will build a significant amount of wealth in the next 3-5 years if they hold and don’t sell.

*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.