11 Apr

A persistent discussion in the cryptocurrency market revolves around the impact of U.S. dollar stablecoins, which are cryptocurrencies tied to the value of the dollar, on the global dominance of the greenback. Cantor Fitzgerald's CEO believes that they do enhance the strength of the dollar and are advantageous for the world's largest economy.

At a Chainalysis Conference on Wednesday, Howard Lutnick stated, "Dollar hegemony is fundamental to the United States of America," as reported by Bloomberg. "It matters to us, to our economy. That's why I'm a fan of properly backed stablecoins, Tether and Circle."

 Stablecoins have become "fundamental for the U.S. economy, driving demand for U.S. Treasury notes and do not pose a systemic risk to the world," according to him.

The dominance of the U.S. dollar in the global economy enables the United States to operate with significant deficits, borrow at lower interest rates compared to other nations, and impose impactful sanctions on adversarial countries.

Cantor Fitzgerald serves as a custodian for Tether Holdings, the issuer of the world's largest stablecoin, tether (USDT). At present, USDT boasts a market capitalization of $107 billion, while the second-ranked stablecoin, Circle's USDC, holds a market value of $32.25 billion, as reported by CoinGecko.

Stablecoins are widely utilized by cryptocurrency traders as funding currencies in spot market transactions and as collateral in derivative trading. During the 2022 Federal Reserve tightening cycle, these cryptocurrencies also functioned as a safe haven.

Confidence among investors in stablecoins was shaken following the collapse of Terra's algorithmic stablecoin, UST, in May 2022. Tether, however, successfully navigated through the crisis, fulfilling redemptions despite persistent doubts about the reserves backing it. In January, Lutnick confirmed that Tether had sufficient funds to support USDT.

Nevertheless, Lutnick holds a skeptical view of central bank digital currencies (CBDCs) and expressed concerns that China may perceive a potential digital dollar as a tool for American surveillance. 

"My fear is that central banks would like to issue a central bank digital currency, that makes sense right?" said he. "But the problem is what will China think, they will define it as the American spy wallet."

Over the next ten years, Lutnick predicted, real-world assets like bonds may be tokenized and traded on the blockchain as soon as the technology is fast enough and affordable enough.

April 2024, Cryptoniteuae

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