Cryptocurrencies Crashed This Week; Digital Cash Are Nonetheless The Future – CBS San Francisco
(CNN) – It hasn’t been a great week for digital currencies.
Bitcoin is trading almost 40% below its record price of $ 64,000 after a sudden crash triggered by regulatory measures in China. Ethereum is down more than 35% from its all-time high and Dogecoin is down more than 45%.
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Investors expect cryptocurrencies to be volatile. But the severity and breadth of the retreat has worried traders about a potential bubble, and observers are asking difficult questions as to whether coins are good stores of value.
The crash follows increased institutional investor interest in crypto assets, a trend underscored by Tesla’s decision to purchase $ 1.5 billion worth of Bitcoin. Takeover by other large corporations and investors may be slowing now.
However, the week also included two major announcements from the US government that, over time, could help establish cryptocurrencies and resolve some issues often associated with digital coins.
The first major announcement came from the U.S. Treasury Department, which required reporting of more than $ 10,000 worth of crypto transfers to the Internal Revenue Service.
“As with cash transactions, it would also report on companies that receive crypto assets with a fair market value of more than $ 10,000,” said a tax enforcement report published on Thursday.
The involvement of the IRS may not sound like a positive move for cryptocurrencies. But the government, which treats coins the same as it does cash, could be an important step in bringing cryptocurrencies into the mainstream.
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But wait, there’s more: the second development came from the Federal Reserve, which announced new steps in the development of a potential digital dollar that would be controlled by the central bank.
Chairman Jerome Powell said in a rare taped video message Thursday that the Fed would release a discussion paper this summer exploring digital payments technology, “with a particular focus on the ability to issue a US Federal Reserve digital currency “. It is asking for public comments on the matter.
“Our focus is on ensuring a secure and efficient payment system that delivers comprehensive benefits to American households and businesses while enabling innovation,” added Powell.
The Fed believes that a digital dollar could represent an improvement over current offerings, including “stablecoins” that are pegged to the value of other assets, including reserve currencies.
“Until now, cryptocurrencies have not been a convenient way to make payments, partly because of their fluctuations in value,” said Powell. “Stablecoins aim to leverage new technologies to improve payment efficiency, accelerate settlement flows and reduce end-user costs. However, they can also pose potential risks to these users and the financial system as a whole.”
The Fed has been researching digital currencies for a while, but other central banks are moving faster. For example, China is already conducting real-world tests with a digital version of the yuan.
Even as the Fed tries to deepen its foray into cryptography, the central bank made it clear that cash is still king.
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“We think it is important that every potential is available [central bank digital currency] could complement rather than replace cash and current digital forms of the private sector dollar, such as deposits with commercial banks, ”said Powell.
