How crypto helps the dollar – POLITICO – POLITICO

How crypto helps the dollar – POLITICO – POLITICO

Blockchain Crypto Market Technology
October 26, 2022 by Coinvasity
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How the next wave of technology is upending the global economy and its power structures How the next wave of technology is upending the global economy and its power structures By signing up you agree to allow POLITICO to collect your user information and use it to better recommend content to you, send you email
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How the next wave of technology is upending the global economy and its power structures
How the next wave of technology is upending the global economy and its power structures
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By BEN SCHRECKINGER 

Presented by TSMC
With help from Derek Robertson

AP Photo
The dollar’s surge in global currency markets — it’s up between 20 and 30 percent against the euro, yen and pound over the past year — is forcing crypto enthusiasts to reevaluate the idea that cryptocurrencies will undermine the dollar’s hegemony. Instead, it now seems that, for the foreseeable future blockchain technology is poised to help the dollar at the expense of weaker sovereign currencies.
That’s because stablecoins are making digital dollars accessible in parts of the world with high inflation and unmet dollar demand, at a time when unbacked cryptocurrencies like bitcoin and ether are down to a third of their peak values.
Though the estimated total market cap of all stablecoins amounts to less than 1 percent of the U.S. money supply, their persistence in the face of cratering crypto markets and the collapse of luna, a so-called “algorithmic stablecoin” show that at least some businesses and people in many parts of the world are eager to get their hands on blockchain-based dollar equivalents.
“It’s a pretty nascent market now, but it’s growing bigger and bigger by the day,” said Chinedu Okpala, the U.S.- and Nigeria-based founder of Oval Finance, which launched last year to offer crypto services to businesses in Africa.
Given the rapid depreciation of some African currencies, like the Ghanian sedi and Nigerian naira — which hit 34 percent and 21 percent inflation rates in August, respectively — Okpala said dollar-backed stablecoins could pose a significant threat to the continent’s monetary order.
“Long-term, unless those currencies stabilize, they’re going to continue to lose ground,” he said.
Okpala said efforts by Nigeria’s central bank to fight back have been largely ineffective. After it cut off crypto exchanges from the banking system last year, users quickly pivoted to peer-to-peer trading.
If stablecoin adoption grows further, though, it is likely to provoke a more sustained backlash from monetary authorities, according to Josh Lipsky, director of the Atlantic Council’s Geoeconomics Center, which tracks the development of central bank digital currencies.
“Central banks around the world are already thinking about that,” he said. If dollar demand proves unquenchable, Lipsky said, central banks would prefer an official U.S. central bank digital currency to today’s private stablecoins, because they are used to dealing with the Federal Reserve.
While the original intention of Bitcoin’s early adopters was to undermine government-backed currencies like the dollar, even some champions of the original cryptocurrency are welcoming the use of dollar stablecoins in financially troubled countries like Turkey, Lebanon and Argentina. Alex Gladstein, chief strategy officer of the Human Rights Foundation, which advocates Bitcoin adoption for people facing authoritarian governments or high inflation, called it “a very good thing.”
Like many crypto advocates, Gladstein views blockchain-enabled dollar adoption as a transitional phenomenon before Bitcoin eventually wins out, but he concedes that such an outcome is a matter of speculation, and could be decades away.
In the meantime, even the most ardent Bitcoin backers are acknowledging the dollar’s strength.
Alexander, a hardcore crypto adapter (and resident of El Salvador’s Bitcoin Beach) shares his musing in a private chat group on the messaging app Telegram. (He included me in the chat on the condition that I not use his last name.)
He said the dollar has won newfound respect in the past week: “I usually say Cash is Trash, but,” he wrote on Friday. “Cash is (currently) King.

A message from TSMC:
Since its founding 35 years ago, TSMC has worked with startup companies to accelerate semiconductor innovations in America by providing access to the most advanced computer chips in the world. This year, we welcomed 19 American customers to exhibit at our Technology Symposium Innovation Zone where event attendees were able to explore firsthand how they achieved success by partnering with TSMC. Their success validates the passion and value TSMC brings to this robust and vibrant ecosystem worldwide. Learn more.
L-R on stage: POLITICO’s Global Tech Editor Steve Heuser, Perianne Boring, Founder & CEO, Chamber of Digital Commerce, Delicia Hand, Director, Financial Fairness Advocacy, Consumer Reports, Thomas Shea, Financial Services Crypto Tax Leader, EY, Commissioner Caroline Pham, CFTC | Derek Robertson/Politico
At POLITICO’s AI & Tech Summit today a group of regulators and industry-watchers gathered to ask what happens when “The Crypto Revolution Meets Washington”?
One major question, as numerous crypto-related bills crop up in various congressional committees, was what the outcome of the upcoming midterm elections might mean for the still-hazy legislative and regulatory framework around crypto.
Perianne Boring, founder and CEO of the pro-crypto interest group the Chamber of Digital Commerce, cited a poll released this morning by a pro-crypto venture fund that claimed one in five voters across four swing states hold cryptocurrency — more people than have union membership in said states. She predicted that as adoption increases more candidates will make crypto policy a prominent part of their campaigns.
Delicia Hand, a consumer advocate at the nonprofit Consumer Reports, pointed out that the speed and scope of crypto adoption has made creating regulatory clarity a point of bipartisan urgency.
“We have got to have a high-level conversation about the current moment socially, politically, and economically, and if not, consumers will find a solution for themselves,” Hand said. “They’re going to leverage the moment of DeFi [decentralized finance, or crypto banking and lending] and figure it out, and regulators and policymakers might find themselves left without a job” — that is, voted out and replaced by new lawmakers, and a new regulatory regime that will protect consumers from crypto-related scams. — Derek Robertson

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Securities and Exchange Commission Chair Gary Gensler during a hearing. | Kevin Dietsch/Getty Images
Artificial intelligence is causing the government to rethink the market’s rules as well.
At MIT’s Artificial Intelligence Policy Forum yesterday, SEC chief Gary Gensler said that the SEC is looking into creating new rules around predictive analytics in finance, saying that algorithms could drive traders to engage in more — and riskier — types of trades, as the investment news website Seeking Alpha reported.
Gensler said technologies like robo-advisers or sentiment analysis risk creating domino effects, with unregulated software at the heart of a vast financial decision-making framework.
“If someone is relying on open-AI, that’s a concentrated risk and a lot of fintech companies can build on top of it,” Gensler said. “Then you have a node that’s every bit as systemically relevant as maybe a stock exchange.” — Derek Robertson

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Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakaes ([email protected]); and Heidi Vogt ([email protected]). Follow us @DigitalFuture on Twitter.
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.
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A message from TSMC:
Since its founding 35 years ago, TSMC has worked with startup companies to accelerate semiconductor innovations throughout the world by providing access to the most advanced computer chips in the world. Our partnership with these startup customers allows them to invest in next-generation semiconductor design and innovation rather than in capital-intensive manufacturing, which has given them the flexibility to innovate broadly and creatively. This year, we were thrilled to welcome 19 American customers to exhibit at the first-ever in-person Innovation Zone where event attendees were able to explore firsthand how they achieved success by partnering with TSMC. Their success validates the passion and value TSMC brings to this robust and vibrant ecosystem worldwide. We are committed to supporting the startup community in this exciting period of transformation and truly honored to be growing together with them. Learn more.
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