All Eyes On Digital Currency
…It seems as though everyone is talking about digital currencies these days. Among the topics being discussed are:
- Should the Federal Reserve issue a central bank digital currency (CBDC)?
- Should digital currencies be better regulated?
In July, Federal Reserve Chair Jerome Powell confirmed that he is undecided about whether the Federal Reserve should issue a CBDC, reported Ann Saphir and Dan Burns of Reuters. He indicated that digital currencies have failed to become a widely accepted means of payment, although a CBDC would eliminate the need for private digital money, especially digital currencies that claim to be pegged to the U.S. dollar. Chris Matthews of MarketWatch explained:
“Critics of stablecoins say they pose significant risks to financial stability, especially after it was revealed that some of these dollar-pegged tokens are not backed by actual U.S. dollars, but a combination of riskier assets…[Chair] Powell said in a congressional hearing that regulators need to apply rules to stablecoins that are similar to those that govern bank deposits and money market mutual funds.”
Congress and the Securities and Exchange Commission (SEC) are both considering ways to regulate digital currency. The pending bipartisan infrastructure bill includes tax-reporting requirements for cryptocurrency brokers. If the bill passes without changes, digital currency sales would be reported to the IRS in much the same way that stock sales are. The change is expected to generate about $28 billion in taxes over a decade to help pay for infrastructure, reported Marcy Gordon of AP News.
In addition to tax regulation, digital currencies may become subject to greater securities regulation. In early August, SEC Chair Gary Gensler discussed the need for cryptocurrency regulation at the Aspen Securities Forum. He said:
“As new technologies come along, we need to be sure we’re achieving our core public policy goals. In finance, that’s about protecting investors and consumers, guarding against illicit activity, and ensuring financial stability… at our core, we’re about investor protection. If you want to invest in a digital, scarce, speculative store of value, that’s fine. Good-faith actors have been speculating on the value of gold and silver for thousands of years…I believe we have a crypto market now where many tokens may be unregistered securities, without required disclosures or market oversight. This leaves prices open to manipulation. This leaves investors vulnerable.”
It seems that changes are coming for the cryptocurrency market.
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
Weekly Focus – Think About It
“Humans are allergic to change. They love to say, ‘We've always done it this way.’ I try to fight that. That's why I have a clock on my wall that runs counter-clockwise.”
― Grace Hopper, U.S. Navy Rear Admiral and computer pioneer
Andrew Zittell is a Registered Representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group, LLC a Registered Investment Advisor. Yerba Buena Financial Partners and Strategic Wealth Advisors Group, LLC are separate entities from LPL Financial.
https://www.bea.gov/sites/default/files/2021-07/gdp2q21_adv.pdf [Table 3: PCE (billions of dollars) / GDP (billions of dollars)]
https://www.barrons.com/articles/dow-stock-market-sp-500-51628901659?mod=hp_LEAD_2 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/08-16-21_Barrons_The%20Stock%20Market%20Keeps%20Hitting%20New%20Highs_9.pdf)