WASHINGTON—Rep. Stephen Lynch (D-MA) is expressing concern over the possible effects of a central bank digital currency (CBDC) and is asking Federal Reserve Chairman Jerome Powell to consider whether there is potential for a tokenized version of the U.S. dollar to wipe out other digital assets.
Lynch's comments came as Powell testified before the House Financial Services Committee, fielding a series of questions about digital assets, Decrypt reported.
“I'm worried about a lot of these stablecoins and other cryptocurrencies,” Lynch said. “Do they go to zero when we come up with a CBDC that has the full faith and credit of the United States behind it?”
Exploring the Concept
Added DeCrypt in its analysis, “The Fed has explored the concept of issuing a digital dollar for years, publishing research as far back as 2016. CBDCs are similar to digital tokens in use today like stablecoins—which track the price of a fiat currency—but are managed by their respective governments instead of being issued by private firms on decentralized networks.”
Powell indicated it’s unclear to him why any cryptocurrency that isn’t “drawing on the credibility of the dollar” like Bitcoin or Ethereum has any value at all, regardless of a CBDC’s release, Decrypt said, adding Powell did not comment on how they could be impacted by a CBDC as a result.
‘Never Understood’
“I’ve never understood the valuation of those,” Powell said regarding coins that “don't have any intrinsic value, but nonetheless, trade for a positive number.”
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