The Federal Reserve Bank of Atlanta has piqued the interest of the cryptocurrency community with a recent post from its Policy Hub series on the implications of Web3 for financial services. The 17-page document by Christine Parlor, a professor at the Haas School of Business at the University of California at Berkeley, is intended to be a basic text and stands out for its comprehensiveness.
Article starts with an analysis of blockchain networks, explaining that “data is categorized and stored in specific locations called ‘wallets’ or ‘addresses’.” After providing the necessary background, Parlor examines decentralized finance (DeFi) and financial infrastructure.
Parlor mentions the regulatory challenges of decentralized autonomous organizations (DAOs), which have “no obvious legal entity” to relate to. Besides:
“The darker side of using tokens as collateral is that it creates interconnectivity between various protocols, which makes estimating or understanding systemic risk more difficult for regulators.”
The Parlor debate abounds with brands of lending protocols and stablecoins.
The Web3 financial infrastructure offers advantages over traditional financing in terms of cost and speed of transactions, Parlor says. For example, trade finance can be greatly improved by reducing costs along the supply chain.
The paper addresses central bank digital currency (CBDC) while talking about foreign exchange and examines the recently launched Project Mariana, which attempts to apply DeFi protocols to foreign exchange. Parlor mentions Stellar and Ripple and describes the XRP token (XRP) of Ripple as “intended as a means of international payment or wholesale settlement currency”.
Ripple has gotten a lot of attention for its agreements with states like Montenegro for the development of a CBDC. There has been much speculation about the US Federal Reserve’s plans to introduce a CBDC, which the Fed has not confirmed. Parlor does not give any indication that such plans exist, nor that the Fed is thinking of using XRP for any purpose.
The Atlanta Fed released a report re: Web3 & finance that mentions #Ripple. They describe #XRP as an “international payment medium or wholesale settlement coin.” “Wholesale settlement” is interesting context. Also a brief overview of Project Mariana. pic.twitter.com/2LAC74RwSR
—WrathofKahneman (@WKahneman) May 25, 2023
Ripple is also in a legal dispute with the Securities and Exchange Commission over XRP’s status as a security.
Additionally, Parlor talks about tokenized bank deposits, a concept promoted by the USDF Consortium, whose CEO Robert Morgan recently discussed the technology at a US House of Representatives hearing, describing it as a “third way.” between traditional finance and DeFi.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.