On Monday, the Atlanta Federal Reserve Bank warned other banks about the dangers of cryptocurrency and blockchain. It comes with the spike in suspected criminal use of crypto.
The Atlanta Fed urges banks to heed the Federal Reserve's full guidelines when dealing with crypto transactions.
Bitcoin's sudden surge
Bitcoin, the prime and longest-standing cryptocurrency, is currently valued at $56,953, marking an 8.1% surge. Earlier, it momentarily breached the $57,000 barrier. Since the turn of the year, it has zoomed upwards by more than 30%.
If it keeps this pace, it could close the day at its highest value since November 30, 2021.
Bitcoin's recent surge is mainly due to a few key factors. These include anticipated lower interest rates from the Federal Reserve, an impending adjustment to how Bitcoin miners are paid, and the launch of Bitcoin exchange-traded funds.
In other news, MicroStrategy, a firm that invests in crypto, recently boosted its Bitcoin holdings by a further $155 million.
Other currencies are also on the rise. Ether's value has increased by 4.3% in the past day, Solana has risen by 4.5%, and Cardano has climbed by 2.6%. Meme-inspired currencies are reaping benefits as well. Dogecoin saw an increase of 13%, and Shiba Inu experienced a growth of 9%.
Atlanta fed advises caution with bank partnerships
The Atlanta Fed has reminded banking regulators to ensure the stability and safety of banks and credit unions. Every partnership a bank has can bring some risk if not managed properly.
The report also points out that businesses keep up with the competition by partnering with payment service providers, often referred to as fintech or financial technology companies. By doing this, financial institutions can tap into a broader market without innovating from the ground up.
The Federal Reserve doesn't dictate who banks can service as long as they follow the law. Banks are free to offer their services to any client type or class as permitted by law or regulation.
Fed's interest in CBDCs with congressional oversight
The Federal Reserve isn't entirely against crypto. They're okay with central bank digital currencies (CBDC). But they're also pretty vocal about wanting to control how digital currency markets work.
Not long ago, the Federal Reserve initiated a scheme called Money and Payments: The U.S. Dollar in the Age of Digital Transformation. The idea was to start a friendly, public conversation about CBDCs.
However, it's crucial to note that the Federal Reserve hasn't decided yet if it will issue these CBDCs.
If a digital currency from a central bank were to be approved, it would need the green light from Congress first. In a 2023 statement made before the House Financial Services Committee, Chair Powell emphasized this necessity.
Bitcoin's polarizing impact on global finance
Investopedia suggests that while some praise cryptocurrency as the dawn of a new financial era, others harshly criticize it. Bitcoin, for instance, has been called "rat poison squared" due to its association with unlawful activities and lack of legal recognition.
Global authorities are constantly monitoring the growth of Bitcoin and taking suitable actions. Some nations, like El Salvador, embrace it as official money.
Others reject it completely, view it as an asset or product, or ignore it. One such instance is the European Union, which is setting up a system for cryptocurrency regulations in 2023.
Bitcoin allows people to bypass their government's restrictions, particularly those around capital limits. It can also provide cover for unlawful activities by making transactions more discreet. Moreover, Bitcoin could change the current financial system by removing the need for middlemen.