WEAK CONGRESS, STRONG BUREAUCRACY: THE DIGITAL DOLLAR QUESTION
When Congress has to write a letter pleading to know whether the Federal Reserve has the extraordinary power to introduce a CBDC without an explicit authorization from the nation’s highest legislative branch, that’s a problem.
That’s exactly what happened this past week, when several Republican lawmakers pressed Federal Reserve Vice Chairman Lael Brainard for an answer to the question, via a formal inquiry.
The group, headed by Rep. Patrick McHenry (R-N.C.), ranking member of the House Financial Services Committee, wants to know whether Fed leadership believes it needs Congressional approval to move forward with a digital dollar, and whether the Fed would create CBDC related accounts for individual Americans.
The banking industry would be significantly disrupted by such a move.
“In your opinion, does support mean an explicit law from Congress authorizing the Fed to issue a digital currency?,” the letter asks.
According to May 2022 testimony, Brainard indicated that for the Fed to launch a digital currency, “support” from Congress and the executive branch would be required.
But whether support would mean new legislation was left unsaid by the Federal Reserve Vice-Chair.
TRENDPOST: Unfortunately, the Republican move may be construed as advocacy on behalf of the banking industry, rather than the American people.
Crypto technology has undeniably already introduced features which are disrupting traditional banking. Crypto wallets are effectively accounts where users can hold and store assets, and those wallets can be used to interact with DeFi and other platforms to earn yields on assets, borrow and lend, etc.
Of course, crypto can also be sent from wallets for payments, directly, or via payment apps that connect to wallets.
Whether the U.S. government will be satisfied to let the crypto industry continue to innovate, and seek specific regulation for aspects like stablecoins, which could offer new life for the dollar’s future status as a reserve currency, is a real question (see “COULD STABLECOINS SAVE THE DOLLAR?” 9 Aug 2022).
Many believe a direct government issued CBDC, and not merely regulations requiring stablecoins to be backed by dollars, is a near certainty.
That would open a Pandora’s Box of issues surrounding crypto innovation, forced adoption of CBDCs, biased protection of outmoded processes and players in the financial sector and beyond, government surveillance and unprecedented control of citizen assets, etc.
The issues extend even further, into geopolitics, the international banking and financial system, and the dollar’s role as a reserve currency.
There clearly needs to be a very broad consideration and approach led by people’s representatives, and taking into account public input on a wide scale.
Whether anything like that level of thoughtful public servant consideration and citizen engagement is even possible in such a politically dysfunctional climate, is another matter.
GAMESTOP MAKES LARGER CRYPTO PLAY
GameStop has joined forces with the FTX US crypto exchange.
The new partnership will include cross-promotions, and connections including FTX gift cards being made available for sale at over 2,900 Gamestop locations across the country.
Gamestop managed to beat concerted efforts by several hedge funds to drive down the price of the stock in early 2021, thanks to a groundswell of support from young traders coalescing on Reddit forums, and utilizing “free trading” on the Robinhood app.
After several hedge funds were dealt serious blows by shorts gone wrong, more controversy ensued when Robinhood halted trades of Gamestop and several other “meme stocks” (ie., stocks deemed to have enhanced value with buyers simply because of some iconic or symbolic aspect).
It turned out Robinhood’s “free trading” business model was facilitated by funneling trade volume through some of the very hedge fund market makers that were hurt by Gamestop’s resilience.
Gamestop has since used its reserves of cash to build inroads into blockchain based gaming and NFT projects. The retailer has a dedicated site currently in beta, https://nft.gamestop.com, where gamers can explore what has become an emerging new paradigm for the gaming industry.
Gamestop’s new association with FTX is another sign that a company which was written off for an outdated business model has more lives to live than Wall Street predicted.
ETHEREUM MERGE UNCERTAINTIES
The Ethereum “merge” upgrade to a proof of stake network consensus protocol is predicted to happen at any moment from 13 to 15 September. That’s when enough validator terminals will have adopted the upgraded software in order for a switch of the entire network to occur.
But there are questions surrounding the upgrade, including whether it will result in a significant number of nodes that choose not to upgrade.
That kind of a “hard fork,” which is seen as likely, will leave two networks: one using Proof of Work (PoW), and the latest upgraded iteration, comprising the majority of network nodes, running the new PoS consensus mechanism.
What happens to ETH tokens held by users in that case? The simplest explanation is that in a hard fork situation, ETH holders could receive tokens for the resulting forked PoW network, in the same amount as the ETH tokens already held in a wallet.
The additional tokens would have a different name, and only function on the forked PoW network.
There are multiple aspects ETH holders should consider. This article at cryptobriefing.com is well worth reading.