During a speech, Jerome Powell, president of the United States Federal Reserve (FED), expressed the country's new monetary policies, where interest rates will remain at almost zero while the inflation rate will exceed 2% annually.
Due to the ravages caused by the COVID-19 pandemic and the current economic crisis, the Federal Reserve (FED) The United States is taking drastic measures to redesign the nation's monetary policy. In this regard, the president of the FED, Jerome Powell He expressed during a speech that the entity will allow the inflation rate to be higher than the original for some time, this as a measure to support the general economy and the labor market after the ravages caused by the crisis. Likewise, Powell stressed that the interest rates on the FED funds will continue at almost zero and that the entity will continue the purchase of US Treasury bonds for the sum of 80 one billion dollars between August and September.
For his part, although in his statements Powell stressed that the new monetary policies will be implemented "for some time", he did not define how much time he was talking about, so Quincy Krosby, a renowned market strategist Prudential Financial, said that these were open questions whose answers are unknown at this time.
“These are all open questions. The answer is, we don’t know, and the Fed doesn’t know. They just know what they want to see.”
Thus, although the new monetary policies will not have an immediate impact on the current economy, over time they will have a profound impact on the price and value of various goods and assets, including cryptocurrencies, and digital assets.
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Implications for the general financial system and cryptocurrencies
As already mentioned, the new monetary policies implemented by the Fed will have profound implications for the way the current financial system works. Banks will now be able to access users' and clients' funds without having to pay them interest for holding their deposits, while at the same time they will not be able to offer competitive products or protection to consumers in the event of bank defaults.
Likewise, the price of real estate, stocks, gold, oil, cryptocurrencies, stablecoins and other assets will be affected in the long term by these policies. Likewise, the fundamental role that the Fed has been playing as one of the most important and powerful banks in the world will also change. The new policies will force banks to keep their assets at the Fed, instead of making loans and making large movements with the money.
It is therefore a profound and silent change that will transform the current financial system, and cryptocurrencies, as in the past, will not escape it. In 2009, when it was announced Bitcoin, the economy was facing a tough situation, and as today, several of the economic foundations and trends that were considered safe and efficient were faltering. Changes in the United States' monetary policy can trigger a new reality for the progress and massive development of cryptocurrencies and digital assets, at a time like this where banks are in a constant struggle to maintain their power and not give in to economic chaos. The evolution of traditional financial institutions into new and more efficient ones is a necessity that cannot be hidden, as well as the need to integrate new technologies and transform the current economic, financial and commercial model.
Stablecoins outside the current banking system
For stablecoins and digital assets to enjoy true mass adoption, these assets will need to break away from their ties to the traditional banking system as collateral holders, and instead find a way to maintain their collateral and comply with regulations outside of this system.
Stablecoins and digital assets must be able to provide value and stability outside of the banking system, as well as impact the global economy through their ability to meet much broader needs in users and society at large. An important point in all of this is the need to minimize the costs associated with the management and distribution of stimulus and other funds, something that would have been achieved if there were programmable money that is understandable to the usual economic agents that require it.
So, although digital assets still have a long way to go so far, the FED's new monetary policies open the doors to the development of new possibilities and mechanisms that lay the foundations for a new economy based on digital assets and programmable money, where commercial banks will have to significantly improve several aspects to remain profitable.
Finally, to date, in relation to cryptocurrencies, since the new FED monetary policies were announced, the price of Bitcoin has risen, fallen and risen again, going from $11.400 USD to $11.600 USD, then to $11.380 USD and now to $12.030 USD per unit as of the date of this publication.
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