FED Turns to Blockchain-based AMERIBOR

Jerome POWELL, the Chairman of the US Federal Reserve, stated that an Ethereum-backed blockchain project operating as a reference rate – called AMERIBOR – could serve as a potential replacement to the London Interbank Offered Rate (LIBOR).

LIBOR is known to compromise itself, as previously bankers reported false interest rates. Since then, financial institutes were looking for a substitute. The Fed continues to support the Secured Overnight Financing Rate (SOFR) as the Alternative Reference Rates Committee’s (ARRC) preferred alternative.

According to Powell, Ameribor is a reference rate created by the American Financial Exchange (AFX) based on a cohesive and well-defined market that meets the International Organization of Securities Commission’s (IOSCO) principles for financial benchmarks. Ameribor uses blockchain as part of its determination of the rates. AFX CEO Richard SANDOR noted that this is the company’s first blockchain-based project.

AFX plans to mint two non-fungible tokens for each party in a transaction. They will be compliant with the ERC-721 token standard and will contain information about both the transaction and the counterparty. AFX Blockchain, however, uses proof-of-authority consensus, instead of the PoS. The PoA means that AFX will maintain a degree of control over the transactions, even though the tokens will be compatible with the public blockchain.

Image courtesy of Ameribor.net