Fed Res research says crypto future is possible in two different scenarios


The United States Federal Reserve shared two approaches, in which the adoption of the use of the digital assets market is possible.

Despite huge volatility in the price of digital assets, adoption of this innovative industry is increasing rapidly among retail investors but the majority of the big players are not planning to go with cryptocurrency investment because of the unclear rules & laws in this industry. 

Recently the Federal Reserve published research regarding the future of this crypto industry, which may follow two different paths to sustain its future. 

In the first approach, the Fed noted that the Crypto industry may intertwine with the traditional financial system so that both financial technology & infrastructure can move with revolution.

“Broadly speaking, there are two conceptual scenarios that could lead to a breakthrough in which blockchain finance may become an important provider of the services currently provided by off-chain financial markets and institutions.”

Further, in the second approach, the crypto assets financial market will move forward with better use cases but should remain parallel to the traditional money market. 

“crypto assets evolving to become a separate, parallel financial system that provides services for the real economy.”

In both these two scenarios, research noted that Centralized Finance (Cefi) & Decentralized finance (Defi) may impact the risk to financial stability because both of these two sectors are outside the regulatory policies.

Research further noted that Centralized entities in the case of Cefi may play a vital role to bring better regulatory policies against real issues. 

On the sudden ups & downs in the price of Defi-based assets, the research said that we can fix this issue by keeping the attention on the various aspects of Defi under the integrated form with the traditional financial system.

Further research proposed the idea to introduce new laws & measures on the stablecoin companies, for example, to allow only those companies to issue stablecoin, which are insured & backed by central bank liquidity facilities.

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