Digital dollar - Circle on the way to the FED
Image Credit: Jason Reed/Getty Images
As we know, Circle is one of the companies that manage USDC, the stablecoin that, with a circulating supply of $23 billion, is the second largest in the world after USDT.
Well, Circle has just signaled its intention to apply to regulators for a banking charter that would turn it into a regular Federal Reserve (Fed) regulated bank.
But there's a nuance: Circle only wants a "limited" banking license. That means it doesn't want to become a full-service bank that provides loans to customers, for example. Rather, its goal is to have the ability to maintain its cash reserves at the Fed, like any U.S. bank, in fact.
In fact, all U.S. banks have a bank "account" with the Fed, where they are required to maintain emergency reserves. However, after Powell's decision to raise the interest rate on these reserves (which was previously at zero), this deposit also yields a small 0.02% interest, so it's no longer just a mandatory "sacrifice."
The most important advantage of being a U.S. bank, though, is being able to borrow money cheaply from the Fed. A "privilege" that would carry with it a whole host of important monetary policy issues.
In fact, one must reflect on the fact that the liquidity reserves that Circle would maintain with the Fed would also be the reserves that support USDC.
In fact, therefore, USDC while remaining a private digital currency, at the same time would be tied to the central bank's reserves and would enjoy the "privilege" of eventual support from the Fed in the event of a liquidity deficit.
It would thus be transformed into a sort of public-private currency.
Are we really on the verge of this unprecedented union?
The answer is simple.
If Circle's request is accepted by the American authorities, it will mean that the Fed and the Treasury are really willing to give the digital dollar the structure we had hypothesized: that is, one that goes beyond the simple digital replica of an inflated currency, but connects the dollar to an ecosystem of private currencies that would sustain its value.
If, on the other hand, the request is not accepted, we will have to start discarding this hypothesis as too good to be true.
This is a truly strategic step, both for the fate of cryptocurrencies in America and for the economic structure of the future digital dollar.
A dollar connected to the bubbling private ecosystem developing in the U.S. would be much more palatable than a digital yuan supported only by China's GDP, which is in decline for a variety of reasons, related to the whims of a government at risk of a mad-authoritarian drift.
The appeal of a dollar linked to private crypto would lie above all in the renewed ability for savers to obtain interest in a world where national currencies have notoriously destroyed this possibility.
Thus, the stability and desirability of the dollar are at stake, but also the possibility of restoring value to the Western financial system.
I will therefore keep my eyes peeled for this news....
Posted Using LeoFinance Beta
