A note published by the US Federal Reserve at a recent conference found that the majority of exports believe that the US central bank digital currency (CBDC) will not fundamentally change the global currency ecosystem.

Committee members at the conference also agreed that the development of digital currencies for central banks outside the United States does not threaten the status of the dollar, but that the development of cryptocurrencies could change the role of the dollar globally, with some saying that stablecoins could enhance the role of the US dollar as a cryptocurrency . The dominant global reserve currency.

The assessments came from expert panel members at a conference on June 16-17 hosted by the Federal Reserve on the “international roles of the US dollar” compiled in a note and published by the Fed on Tuesday. The conference was used to gain insight from policy makers, researchers and market experts to understand “potential factors that may change the dominance of the US dollar in the future,” including new technologies and payment systems.

Discussing a panel on digital assets and whether central bank digital currencies will provide benefits to the dollar, panelists agreed that supporting technology alone would not “lead to fundamental changes in the global currency ecosystem.”

Speakers at the session included MIT Digital Currency Initiative Director Neha Narula, Head of Research at BIS Hyun Sung Shin, Chief Investment Strategist at Bridgewater Asset Management Rebecca Patterson, and Head of Forex Research at HSBC Paul McKelle.

Committee members agreed that factors such as market and policy stability, along with market depth, are more important to dominant reserve currencies such as the US dollar than the development of the Fed’s digital dollar.

The development of central bank digital currencies by other countries was also generally agreed by the commission as tending to focus more on that country’s domestic retail market and, therefore, was considered “not to pose a threat to the international position of the US dollar”.

The Federal Reserve noted that the size and scope of digital central bank currencies for cross-border payments “remain very limited,” indicating that such systems do not yet pose a threat to the dollar, which accounts for the majority of international financial transactions, according to an October 2021 note.

With a focus on cryptocurrencies, panelists said the development of digital assets could transform the international role of the dollar, but the adoption of institutional investors has been stifled by the lack of a regulatory framework, leaving the current crypto market under the control of speculative retail investors.

Another panel, including Federal Reserve financial research advisor Asani Sarkar and finance professor Jiakai Chen, concluded that part of the demand for cryptocurrencies, especially Bitcoin (BTC), was driven by a desire to evade local capital controls, citing BTC prices in China is trading at a premium in comparison to other countries.

Despite this, the Federal Reserve says that committee members do not see cryptocurrencies as a threat to the global role of the dollar in the short term. Some in the “medium term” have suggested that crypto could enhance the role of the dollar if “new sets of services structured around these assets are pegged to the dollar,” a possible reference to stablecoins, cryptocurrencies pegged to the value of fiat currency (usually the US dollar).

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Committee members’ advice may help put a new twist on matters for Fed members.

Previously, the Federal Reserve Board of Governors said in June that stablecoins that are not backed by enough liquid assets and appropriate regulatory standards “create risks for investors and possibly the financial system” potentially pointing to a TerraUSD Classic (USTC) collapse.

The board’s comment came before Federal Reserve Chairman Jerome Powell stated that a central bank digital currency could “help preserve the dollar’s international standing.”

Source: CoinTelegraph