The United States will soon be able to use blockchain in a system that bases loans, financing and other financial services on interest. Recently, the FED’s Chairman, the country’s Central Bank, gave a statement supporting the idea.
What is at stake is the replacement of the LIBOR (London Market Interbank Rate), so far a benchmark for interest on loans, mortgages and even student financing. It takes into account markets in dollar, euro, pound, yen and Swiss franc.
And precisely the reference AMERIBOR, which works on the Blockchain of Ethereum, is being quoted to replace LIBOR. Therefore, the blockchain network would be used to validate the changes in the rates referenced in the panel.
AMERIBOR was developed by the American Financial Exchange (AFX). The system uses two tokens in the ERC-721 standard to settle a transaction. They are produced the instant the process starts, bringing with them data about the transaction itself and the counterparty.
Ethereum’s network use is just the tip of the iceberg
In 2016, Federal Reserve Governor Lael Brainard, who has been tracking blockchain technology for some time, said he recognized blockchain as a tool that could change the way financial market’s participants trade. The Boston FED has been studying the technology in a low profile way since 2016 and conducted a test last year with Ethereum and Hyperledger in a proof of concept.
As a regulator, the Federal Reserve is aware that companies are experimenting and using blockchain technology. For that reason, it’s only natural that as private sector adoption increases, the central bank will keep an eye on these trends and conforms with the way markets and banks start using the technology.