Category Archives: Interest Rates

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Bitcoin Spike Down to Public Distrust of “Irresponsible” Federal Reserve

Bitcoin Spike Down to Public Distrust of “Irresponsible” Federal Reserve

An asset manager during an interview with financial media outlet MarketWatch said that Bitcoin’s sudden spike earlier this week was a result of growing public discontent and mistrust of the US Federal Reserve Bank. According to him, people now see Bitcoin as a hedge against the “irresponsible monetary and fiscal policy” of the US central bank.

Highlight: “I think we have definitely seen a renewed interest in the last two months,” says Ikigai Asset Management Founder Travis Kling on $BTC topping $5,000. https://t.co/ohsBg29IFZ pic.twitter.com/OUg8dia0Gz

— Yahoo Finance (@YahooFinance) April 2, 2019

Ikigai Asset Management founder and chief investment officer Travis Kling blamed the constant manipulation of interest rates by the Federal Reserve Bank and its political agendas for this public lost of faith:

“We had the Fed do a complete U-turn into dovish mode. Then everyone else [European Central Bank and Bank of Japan] followed… We now have this set-up where they [central banks] have become politicized both in the US and globally. It’s the new world we are living in.”

Kling believes that this mistrust will only become deeper and more people will embrace Bitcoin, so this current stage will lead to renewed interest in the cryptocurrency.

The Federal Reserve has raised interest rates seven times during the current government’s two-year regime. Last year alone, interest rate was upped four times. Critics have called this manipulation, pointing out that during previous eight years of administration under Barack Obama, the Federal Reserve had only hiked rates once.

There are growing calls to abolish the central bank, with Bitcoin skeptic-turned-advocate and ex Congressman Ron Paul — the father of current Senator Rand Paul — persisting with recommendations to allow a free market to determine interest rates in favor of artifical manipulationhas repeatedly said the Fed should let the free market dictate interest rates instead of artificially manipulating them.

 

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Bank of Korea: CBDC Could Threaten Commercial Bank Stability

CBDC Could Threaten Financial Stability of Commercial Banks, Says Bank of Korea

The Bank of Korea (BOK) has said that the introduction of a state-owned and issued digital currency in the form of central bank digital currency (CBDC) in South Korea could possibly zero-out commercial banks, reports Yonhap News Agency.

According to the source, the BOK published a report expressing concerns with low deposits demands into commercial banks that may result from the implementation of a state-backed CBDC into the financial system.

Kwon Oh-ik, one of the co-authors of the report, wrote: “The CBDC is a kind of a BOK-issued bank account. People trust it more than one in a commercial bank”. This implied that as customers are likely to trust the blockchain-based currency type backed by the BOK as opposed to the legacy form of money transfer and handling, this might lead to low liquidity in such commercial banks as customers withdraw their money. This would invariably shoot up interest rates.

Commercial banks are largely dependent on the loan infrastructure and if deposit services reduce, making it hard for the banks to have access to liquid cash for loan maintenance, then interest rates will then go up. Invariably, that may reduce patronage and consequently reduce the businesses of such banks.

Banks around the world have been discussing different application models for blockchain and cryptocurrencies. One such possibility involves CBDC, and talks about facilitating cross-border payment infrastructures. Banks have identified CBDCs as a government type of cryptocurrency which will constitute the exactness of a fiat currency.

At last, one thing some central banks around the world and crypto-enthusiasts could agree on is that a digital asset built on the blockchain could represent a store of value as well as a medium of exchange, and possibly capable of replacing the legacy fiat currency formats.

A CBDC could play a significant role in mass adoption of cryptocurrency. However, as exciting as that may sound for Seoul-based crypto enthusiasts, the South Korean central bank has a differing opinion.

The bank did say last week that it is not rushing into issuing a CBDC even though many financial institutions around the globe are more welcoming to the prospects of the financial instrument. The report published by the bank further reiterates its stance on the subject of CBDC.

 

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