What are we talking about here? Federal Reserve is taking an initial step towards launching its own virtual currency. The move is disturbing to banks as it gives millions of low-income Americans access to the financial system and fortifies the dollar’s status as the world’s reserve currency. The rise of private cryptocurrencies is motivating the Fed to start considering a digital dollar to be used alongside the traditional paper currency. The biggest driver of causing the concern was a Facebook – led effort in 2019, to build a global payments network using crypto technology. Facebook’s action demonstrated how the private sector could, theatrically create a massive currency system outside of government control. Globally, central banks around
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What are we talking about here?
Federal Reserve is taking an initial step towards launching its own virtual currency. The move is disturbing to banks as it gives millions of low-income Americans access to the financial system and fortifies the dollar’s status as the world’s reserve currency.
The rise of private cryptocurrencies is motivating the Fed to start considering a digital dollar to be used alongside the traditional paper currency. The biggest driver of causing the concern was a Facebook – led effort in 2019, to build a global payments network using crypto technology. Facebook’s action demonstrated how the private sector could, theatrically create a massive currency system outside of government control.
Globally, central banks around the world are also exploring the idea of issuing their own digital currencies. Fiat versions of cryptocurrency that operate more like physical cash. They would have some of the same technological benefits as other cryptocurrencies. Digital currencies would compete with banks by giving depositors alternative safe places to put their money.
Voicing the Pro – Senator Elizabeth Warren
“Legitimate digital public money could help drive out bogus digital private money, while improving financial inclusion, efficiency, and the safety of our financial system — if that digital public money is well-designed and efficiently executed,”
Fed explores ‘once in a century’ bid to remake the U.S. dollar, Politico, Victoria Guida, June 2021
As said at a hearing on Wednesday, which Senator Warren convened as chair of the Senate Banking Committee’s economic policy subcommittee.
Voicing the Con – American Bankers Association in a statement to lawmakers
“The United States should not be implementing a central bank digital currency simply because we can or because others are doing so. The benefits are ‘theoretical, difficult to measure, and may be elusive.’ the negative consequences ‘could be severe.’”
Fed explores ‘once in a century’ bid to remake the U.S. dollar, Politico, Victoria Guida, June 2021
Why do it?
Other than providing unwelcome competition for banks;
- It gives depositors safe haven for people to place their money.
- A person or a business could keep their digital dollars in a virtual “wallet” and then transfer them directly to someone else without needing a bank account.
- Even if a bank was operating the wallet, the firm wouldn’t be able to lend out the cash.
- Unlike other crypto assets like Bitcoin or Ether, the account would have the backing and control by the central bank, allowing the monetary authorities to use it, like any other form of the dollar, in its policies to guide interest rates.
It will be up to Congress to decide whether the central bank should formally pursue such a project,
Fed explores ‘once in a century’ bid to remake the U.S. dollar, Politico, Victoria Guida, June 2021