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Crypto investors ‘should always be paying attention’ to the Fed: CoinDesk editor

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Nikhilesh De, CoinDesk managing editor for global policy & regulation, joins Yahoo Finance to discuss what today's Fed policy decision means for the crypto market and the outlook for a central bank digital currency.

Video transcript

EMILY MCCORMICK: Welcome back. During this afternoon's press conference, Federal Reserve Chair Jerome Powell wasn't asked directly about cryptocurrencies, but we did still see a reaction in crypto markets to this latest Fed decision. Now, Bitcoin prices pared gains from earlier today and those are now trading around $37,000. That price action is similar to what we saw in equities as well.

For more, we're welcoming in Nik De, CoinDesk Managing Editor of Global Policy and Regulation. Nik, given the fact that Bitcoin's correlation with stocks recently has increased, the fact that we've been hearing that tighter monetary policy could weigh on speculative assets like Bitcoin, should crypto investors be paying more attention to what's been coming out from the Fed?

NIKHILESH DE: Hey, good afternoon. Yeah, I think crypto investors should always really be paying attention, you know, especially given that the Fed has, at least recently, started making actual announcements related to how it's approaching at least central bank digital currencies, if not Bitcoin and other digital assets directly. But yeah, there's definitely a lot to pay attention to. And as you noted, crypto has been if not directly correlating equities and more traditional securities, it has been some pretty similar trends recently.

ADAM SHAPIRO: Help us understand what it would look like-- let's plan a year into the future. The Fed says somehow we're going to get some kind of central bank digital coin. What's the impact on Bitcoin and other crypto assets? Or would there be an impact?

NIKHILESH DE: Honestly, I don't think there really would be. Right now, the way the Fed seems to be approaching this idea of a central bank digital currency or a digital dollar is just kind of a potentially blockchain-based equivalent to the existing dollar. So in a report published last week, the Fed kind of outlined how it is looking at the necessary policy goals, and none of them really kind of address the role that Bitcoin or other cryptocurrencies are playing right now.

It's more just they want a digital version, or potentially would want a digital version of the dollar that could be used for international policy or to further any of the existing goals for the dollar as it stands. So Bitcoin, whatever happens with Bitcoin, and Ether, and other digital assets, I think that will continue on its own trend regardless.

ADAM SHAPIRO: So just to follow up with what you just said, and it helps us understand the impact-- if we get this central bank digital whatever in a year, it doesn't impact what we call currencies-- cryptocurrencies, which are really assets-- but doesn't it kind of pull the curtain back, you know, from "The Wizard of Oz" and say, look, these have value.

But it's kind of like gold. I mean, I'm watching the mayor of New York get paid in Bitcoin, but he might as well just get paid in gold because Bitcoin in the world you've just, perhaps, laid out for us, works in the same way, right?

NIKHILESH DE: Yeah. I mean, my interpretation of that report is that if the Fed receives authorization from Congress and the president to launch a central bank digital currency and it actually does so, then they're not going to be looking to rewrite the global financial system here. They're just trying to do what they've always been doing.

And so in that sense, it's a little bit of a conservative, you know, description even, you could say-- whereas, yeah, Bitcoin is going-- it's currently being looked at as this sort of potential inflation hedge, potential chaos hedge. And I don't see that changing, especially from those who are true believers in Bitcoin. They're not going to be looking to a Fed digital dollar as either vindication of digital assets or as the end of digital assets.

EMILY MCCORMICK: I want to shift gears and ask about something on the state level, because the New York State Senate just confirmed Adrienne Harris, who is a former federal official and professor, to lead the New York Department of Financial Services. I'm wondering, what do you think this means for the outlook for cryptocurrency regulation and policies in New York state specifically?

NIKHILESH DE: So Adrienne Harris actually had a confirmation hearing before the Senate Finance Committee in New York on Monday. And she actually did kind of describe her approach to crypto in saying that she wants to give more resources to the team that reviews BitLicense applications, so New York's virtual currency license.

There's been apparently a backlog of applications. Companies want to do business but have not had permission to do so. And she suggested that she would support giving that team more personnel or whatever they need to do so. She also expressed support for a senate bill that would allow NYDFS to collect assessments off of the companies that regulates.

So you know, the New York Department of Financial Services does not get funding directly from the state itself. It's funded partly by assessments and whatnot it collects from the companies it's overseeing. So it could give it a bit more-- you know, some more resources to oversee crypto and crypto companies. But it could also mean crypto companies have to maybe factor that into whether or not they want to do business in the state to begin with.

EMILY MCCORMICK: All right, we'll leave it there for now. Nik De is CoinDesk Managing Editor of Global Policy and Regulation. Thank you so much for your time.

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