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Blocking The Fed ❌

Ether Capital Newsletter
Ether Capital Newsletter
A big topic of conversation this week has been around central bank digital currencies (CBDCs) and which countries are making their next move. 🏦
The Fed’s Take
U.S. Federal Reserve Chair Jerome Powell said on Tuesday the Fed’s long-awaited report on CBDCs will be released “in the coming weeks,” but gave no firm timeline. As a side note, this is the same report we were expecting to be released last September. 🤔
As in all cases involving central banks, you can bet there will be a large amount of control proposed by the Fed over how a CBDC will be integrated into the existing financial system.
It’s important to understand that a major reason why crypto is so widely adopted is for its core values of transparency and neutrality. Developers all over the world are cooperating to build a new financial system that allows people to have autonomy over their assets and participate on equal terms. 🛠️🤝🏼
The control that a centralized party (i.e., a bank) has over the financial system is divergent from the broader ethos of the crypto ecosystem. There’s also an immeasurable amount of innovation taking place on blockchains like Ethereum, and we’re curious to how governments will balance control while encouraging financial innovation.
Not Everyone Agrees
U.S. Minnesota Congressman Tom Emmer, an outspoken advocate of crypto, drafted a bill 📝 earlier this week to block the Fed from issuing a CBDC.
His argument is that digital currencies should not be used as a surveillance tool and that it’s the country’s responsibility to ensure financial privacy, maintain the dollar’s 💵 dominance and cultivate innovation.
Emmer says if the Fed fails to abide by these three principles, the U.S. government could be likened to China, which has exercised “digital authoritarianism” over its country. He claims the Fed risks becoming a retail bank that could collect personally identifiable information on users and track their transactions indefinitely.
It’s worth noting that while distributed ledger technology does keep record of all transactions on a blockchain, users are not personally identified and all parties have access to this information. The difference being it’s a system that prioritizes efficiency over control.
Global Adoption of CBDCs
The idea of central bank digital dollars seems to be growing in popularity. The number of countries exploring the possibility of this financial technology has more than doubled since 2020. 🌎
So far nine central banks, including Nigeria and The Bahamas, have already introduced a CBDC, but progress worldwide appears to be uneven. There are currently 87 countries weighing the possibility of a digital currency, according to the Atlantic Council’s CBDC tracker, but all of them are at various stages of research and development.
Testing The System
While it’s just an experiment at this point, the Bank for International Settlements (BIS) announced it has made headway with its CBDC interoperability project by demonstrating wholesale CBDC settlement with commercial banks.
BIS — alongside the central Swiss National Bank and SIX, a Swiss financial infrastructure service provider — have been working on an experiment called Project Helvetia, which is aimed at helping central banks roll out their CBDC offerings.
The project involves five commercial banks, namely Citi, Credit Suisse, Goldman Sachs, Hypothekarbank Lenzburg and UBS to see if CBDCs can integrate into their core banking systems.
It’s important to emphasize that wholesale CBDCs are not to be confused with central bank digital currencies that would be available to retail customers. In fact, Switzerland already said it has no plans to roll out a digital currency. Wholesale in this context is all about testing the existing bank infrastructures to verify digital currencies can be transacted in a way where credit risk is averted.
We’re Hiring! 🎇
We have two great positions that have opened at Ether Capital. We’re looking for a Director of Finance and a DevOps Engineer who will oversee our staking strategy.
If you’re passionate about smart contract technology and the future of finance, we want to hear from you! 🙌
Newsworthy Links & Highlights
Crypto exchange FTX Trading Ltd. launched a US$2 billion venture fund to support crypto start-ups, which is one of the largest to date. 💰 Investments could be as low as US$100,000 and as high as hundreds of millions of dollars. FTX also announced it brought on crypto investor Amy Wu to lead the venture, whom is particularly interested in crypto gaming companies, as well as insurance and security products.
Coinbase announced it’s purchasing FairX, a CFTC-regulated derivatives exchange, to introduce new products like bitcoin futures to its American retail and institutional investors. The company released the news via a blog post on Wednesday.
Binance CEO Changpeng Zhao, who commonly goes by “CZ,” is one of the richest crypto entrepreneurs in the world with a net worth close to US$100 billion, according to the Bloomberg Billionaires Index. A blog post on Binance’s website talks about the 44-year-old’s humble beginnings as a Chinese-born immigrant to Canada 🍁 where he took on various odd jobs — including a stint at McDonald’s — to support his family before building his crypto empire.
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