The Fed is taking about the creation of a digital USD. The move could shake up the banking system while giving many low-income earners access to a financial system they might not have otherwise have.
Chairman Powell, citing the progress of payments technology, said the Fed has been “carefully monitoring and adapting” to those innovations.
“The effective functioning of our economy requires that people have faith and confidence not only in the dollar, but also in the payment networks, banks, and other payment service providers that allow money to flow on a daily basis,” Chairman Powell said in a video message.
“Our focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation,” he said.
Now central banks around the world have started to explore the idea of issuing their own digital currency that would function in the same authority as their physical counterpart while also offering some of the benefits of other cryptocurrencies.
Next month, the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology’s Digital Currency Initiative will aim to publish the 1st findings of their work to see if a digital currency could work a practical level.
Ultimately, the decision will be left to Congress to see if the Fed should pursue such a measure.
Lawmakers on both sides appear interested in the idea, as they keep an eye out for China in its efforts to develop its own central bank digital currency that is on the rise with other cryptocurrencies that could diminish the USD.
The security benefits and convenience of transactions that blockchain offers could be reason enough for the official sector to soon replace its legacy approach to sovereign currencies with a digital alternative.
Contributing LTN economist Bruce WD Barren notes that the Fed and lawmakers on are looking at the benefits a digital US dollar offers to people without bank accounts, but that commercial banks will putting up a fight, because “it will be highly disruptive to their deposit profit plus capital liquidity structure. Also, to them “cash needs to remain King for a number of reasons as a digital dollar has no geographical boundaries.”
Have a healthy weekend, Keep the Faith!