Jerome H. Powell, the chairman of the U.S. Federal Reserve Board, has hinted a possible replacement of the London Interbank Offered Rate (LIBOR) using an Ethereum blockchain-based version of AMERIBOR.
According to a Forbes report, Powell suggested a question by Senator Tom Cotton (R-AR) on whether the Federal Reserve Board would support alternative benchmark interest rates besides the Secured Overnight Financing Rate (SOFR).
Senator Cotton had explicitly asked whether AMERIBOR, an index that now uses a permissioned version of Ethereum to track and measure lending rates, could be considered as a replacement of LIBOR.
The London Interbank Offered Rate (LIBOR) is a widely used benchmark for short-term rates but has failed the test of criticism in the face of corrupt bankers who manipulate lending rates.
Regarding the possibility of replacement, Chairman Powell said in response that market participants are the ones to make a switch to such alternative benchmark interest rates voluntarily.
The Fed Chair specifically said:
The Federal Reserve convened and supported the work of the Alternative Reference Rates Committee (ARRC) and viewed SOFR [such as AMERIBOR] as a robust alternative that will help many market participants in the transition away from LIBOR.
However, he reiterated that “ARRC’s recommendations and the use of SOFR are voluntary and that market participants should seek to transition away from LIBOR in the most appropriate manner given their specific circumstances.”
It is to be recalled that in late 2019, American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced the launch of its AMERIBOR on the Ethereum blockchain.
Such a solution, as confirmed by Chairman Powell’s latest comments, could challenge the traditional bond market benchmark, LIBOR, and potentially provide a more transparent alternative to prevent corrupt bankers from manipulating lending rates ultimately.
In another recent report about Ethereum adoption, Coinfomania reported that RealT had sold up to $1million in tokenized real estate using its platform built on the Ethereum blockchain.