Cryptocurrencies and the U.S. dollar - a symbiosis that does not yet require surgical intervention

The topic of cryptocurrency ban in the U.S. became actively discussed after the Chinese authorities moved to active actions and began to squeeze businesses related to digital assets and put cryptocurrencies themselves under a ban. Against the backdrop of the Celestial Empire, the U.S. authorities chose to hold off, at least with regard to any official statements. Yes, criticism of the industry continued, but in fact all the actions of regulators and authorities were limited to the fact that everyone was “keeping a close eye” on digital assets.

After China fully exhausted all possible ways to influence the behavior of cryptocurrencies through harsh restrictions, in the U.S., Federal Reserve Chairman Jerome Powell issued a statement saying there were no plans to ban them. After him, Gary Gensler made a similar statement, saying that the country has “a different path. And this phrase reflects what we have been talking about for a long time: for the U.S. to oppose China is an image. So if the U.S. authorities wanted to go the way of China, they would still have to choose a “different path.

Balance and scale

Nevertheless, we do not exclude that harsh measures against cryptocurrencies could be applied by the U.S. authorities. However, this can only happen if digital assets actually threaten the position of the U.S. dollar. But according to a recent report from the U.S. Federal Reserve, the hegemony of the dollar is currently not threatened.

We note that at the same time, other central banks have expressed some concerns about the development of the crypto industry and the possible negative impact of cryptocurrencies on the sovereignty of national financial systems. This was stated in the ECB, the NBK, the Bank of Russia, and actually this very thesis is fundamental to the development of state digital currencies, CBDC. While Europe and China are actively piloting projects in this area, the U.S. is only thinking about the need to create a national cryptocurrency.

The fact is that the U.S. dollar continues to be the world’s number one currency, and the entire financial system revolves around it. If cryptocurrencies can hit financial sovereignty, it will affect any country or region, except the U.S. After all, even when valuing digital assets, we first of all give their dollar equivalent

Maintaining the status quo

Crypto market, like all other financial markets, showed its dependence on the U.S. Federal Reserve’s monetary policy. Now all investors are closely watching when the regulator will begin to reduce the economic stimulus program. Market participants understand perfectly well that curtailment of purchases of bonds will lead to sharp reduction of positions and capital outflow from all financial platforms, behavior of the crypto market will also be quite predictable. The global financial system is designed so that the U.S. dollar can only be threatened by the U.S. dollar. So the conclusion is: why prohibit something that is already under control?

The threat to the dollar from the crypto industry can come if, for example, several major regions agree with each other on direct payments in national currency, with the cryptocurrency rather than the U.S. dollar as the standard of valuation. But so far the probability of such an event is very low. Moreover, if it happens, the U.S. will not need to ban cryptocurrencies, as the existence of cryptocurrency exchanges will become a necessity.

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