October 19, 2021

Cryptocurrencies and the US dollar are a symbiosis that does not require surgical intervention yet

Cryptocurrencies and the US dollar are a symbiosis that does not require surgical intervention yet

Yuri Mazur, Head of Data Analysis Department, CEX.IO Broker

The topic of the prohibition of cryptocurrencies in the United States has become activediscussed after the Chinese authorities took action and began to squeeze out businesses related to digital assets, and the cryptocurrencies themselves were banned. Against the backdrop of the Celestial Empire, the United States preferred to pause, at least with regard to any official statements. Yes, criticism towards the industry continued, but in fact, all actions of regulators and authorities were limited by the fact that all “carefully followed "digital assets.

After China completely exhausted everythingpossible ways of influencing the behavior of cryptocurrencies with the help of strict restrictions, in the United States, the head of the Federal Reserve Jerome Powell made a statement that there were no plans to ban them. After him, Gary Gensler made a similar statement, saying that the country had "a different path." And this phrase reflects what we have been talking about for a long time: for the United States, opposition to China is an image one. Therefore, if the US authorities wanted to follow the path of the PRC, they would still be forced to choose a "different path."

Balance and scope

However, we do not rule out that tough measuresin relation to cryptocurrencies by the US authorities can be applied. However, this can only happen if digital assets actually threaten the position of the US dollar. But, according to a recent report from the US Federal Reserve, the hegemony of the dollar is currently not in danger.

Note that at the same time, other central banksexpress some concerns about the development of the cryptoindustry and the possible negative impact of cryptocurrencies on the sovereignty of national financial systems. This was stated by the ECB, the NBK, the Bank of Russia, and in fact this thesis is fundamental for the development of state digital currencies, CBDC. While projects in this area are being actively piloted in Europe and China, the United States is only thinking about the need to create a national cryptocurrency.

The thing is that the American dollarcontinues to be the number one currency in the world, and the entire financial system revolves around it. If cryptocurrencies can hit financial sovereignty, then this will affect any countries and regions except the United States. After all, even when evaluating digital assets, we first of all give their dollar equivalent.

Cryptocurrencies and the US dollar are a symbiosis that does not require surgical intervention yet

Maintaining the status quo

The crypto market, like all other financialmarkets, has shown its dependence on the monetary policy of the US Federal Reserve. Now all investors are closely watching when the regulator will begin to reduce the program to stimulate the economy. Market participants are well aware that the curtailment of bond redemption will lead to a sharp reduction in positions and capital outflow from all financial platforms, the behavior of the crypto market will also be quite predictable. The world financial system is designed in such a way that the American dollar can only be threatened by the American dollar. Therefore, the conclusion suggests itself: why prohibit something that is already under control?

The threat to the dollar from the cryptoindustry couldcome in the event that, for example, several large regions agree with each other on direct settlements in national currency, while the standard of assessment will not be the American dollar, but the cryptocurrency. But so far the likelihood of such an event is very low. Moreover, if this happens, the United States will no longer need to prohibit cryptocurrencies, since the presence of cryptocurrency exchanges will become a necessity.

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