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The Fed chair noted the use of the Ethereum-based reference rate

June 5, 2020

In a letter to Senator Tom Cotton (R-AR) on May 28, Jerome Powell, Chairman of the U.S. Federal Reserve, described an Ethereum blockchain-based reference rate called Ameribor as effective for some, but not all.

Ameribor is a tool of the American Financial Exchange (AFX). The company uses the Ethereum blockchain to track interbank loans by minting ERC-721 tokens for each refund.

The President of the FED replies to a general reference rate

After hearing the Committee on Banking, Housing and Urban Affairs in February, the United States Senator. Cotton sent questions to President PowellThe Senator referred to Powell’s mention of a Avoid using LIBOR, an average interest rate based on data from various London banks.

The Fed chair noted the use of the Ethereum-based reference rateThe Fed chair noted the use of the Ethereum-based reference rate

Cotton also noted The banks’ wishes for a reference interest rate other than the LIBOR alternative SOFR, a overnight rate between banks, with the potential for credit sensitivity. “Is it appropriate to use Ameribor for institutions for which it most accurately presents its funding costs?” Cotton detailed on the question he sent.

Powell explains to Senator Cotton the value of Ameribor

“The Federal Reserve has convened and supported the work of the Alternative Reference Interest Rate Committee” (ARRC). Powell said in the letter to answer the Cotton question from the Federal Reserve’s perspective: SOFR is a solid option outside of LIBORPowell said: Although SOFR is not a solution, Powell pushed for a change at a different rate than LIBOR, depending on the needs of each company.

AFX’s Ameribor takes a number of market dynamics into account, according to Powell. The course complies with the parameters set by the International Organization of Securities Commissions (IOSCO).

Powell said:

“While this is a perfectly reasonable rate for banks that are financed through the US financial exchange or for other similar institutions for which Ameribor may reflect their financing costs, this may not be a natural option for many market participants.” .

Powell was featured in several Cointelegraph headlines in 2020, including his explanation of digital printing of dollars paired with that of physical dollars.