Crypto-skeptic US Federal Reserve governor talks potential benefits of blockchain and tokenization
A senior crypto skeptic at the US Federal Reserve has acknowledged that blockchain and tokenization could have an innovative impact on the future of finance.
Christopher J. Waller, one of the seven members of the Fed’s governing board, says in a new speech that smart contracts and tokenization carry inherent risks, but also hold “significant promise” in terms of their potential to make the financial sector more efficient.
The Fed governor notes that private sector companies are executing currency trades via the blockchain.
“Separately, financial institutions have used blockchain to facilitate intraday repo transactions. The parties to these transactions can have more flexibility as to when the transactions are settled, which in turn has the potential to create additional capital and liquidity efficiencies.
And the blockchain’s atomic settlement functionality can serve as another way to achieve an important risk mitigation: using repurchase agreements as an example, the repo ‘seller’ can have confidence that it will receive the specified loan amount in exchange for the collateral it provides; while the repo ‘buyer’ knows it will receive the stated collateral.
This effort is still in the early stages, but I expect that as the functionality expands to include more currencies, eligible securities and new products, there will be more participation and growth.”
Waller argued in a separate speech in February that digital assets are like baseball cards and have no intrinsic value.
“To me, a crypto asset is nothing more than a speculative asset, like a baseball card. If people believe that others will buy it from them in the future at a positive price, it will trade at a positive price today. If not, the price go to zero.
If people want to hold such an asset, then go for it. I wouldn’t, but I don’t collect baseball cards either. But if you buy crypto-assets and the price goes to zero at some point, please don’t be surprised and don’t expect the taxpayers to socialize your losses.”
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