The Federal Reserve Bank of New York will begin a 12-week experiment, wherein it will practice the management and administration of a state-sponsored cryptocurrency, the Daily Wire reported.
A Federal Reserve press release informed that the bank will “experiment with the concept of a regulated liability network,” a way by which the federal agency will regulate “digital asset transactions that connect deposits held at regulated financial institutions using distributed ledger technology.”
As corporations that are effectively part of the state, Citi, Mastercard, BNY Mellon and Wells Fargo will join in on the scheme. Federal Reserve Chair Jerome Powell said earlier this year that his “mind is open” to a digital dollar.
He said at the time that he was “legitimately undecided” on whether the “benefits outweigh the costs” of digital dollars.
“We would want very broad support in society and in Congress,” he said. “It’s a very, very important initiative, and I do think we should ideally get authorization.”
The timing of the test is, of course, not coincidental. It unfolds concurrent with the downfall of FTX, which in less than a week went from the third-largest cryptocurrency exchange in the world to bankruptcy court.
The embattled cryptocurrency exchange, short billions of dollars, is seeking bankruptcy protection after the exchange experienced the crypto equivalent of a bank run. FTX, its affiliated hedge fund Alameda Research, and dozens of other companies filed a bankruptcy.
Standing by with a zeal for regulation was Sen. Elizabeth Warren, D-Mass., who has used the crisis to eagerly call for federal intervention.
“Too much of the crypto industry is smoke and mirrors,” Warren contended. “It’s time for stronger rules and stronger enforcement to protect ordinary people.”