What Would You Call An American Crypto Currency?

Written By BlabberBuzz | Sunday, 13 June 2021 19:30

The Federal Reserve is exploring the production of a digital U.S. dollar. The move could shake up the banking system while providing many low-income earners with access to a financial system they might not have otherwise had.

Chairman Jerome Powell, referencing 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,” 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.

Sens. Elizabeth Warren, D-Mass., and John Kennedy, R-La., are supporting the work for the potential benefits it could give to people without bank accounts. But banks are putting up a fight.

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"The United States should not implement a [central bank digital currency] simply because we can or because others are doing so," the American Bankers Association said, according to Politico. The group added that while the benefits "are theoretical, difficult to measure, and may be elusive," while the negative consequences "could be severe."

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In the past few years, the sudden rise of cryptocurrencies has caused discussions in the Fed to provide a digital version of the dollar to be used alongside the traditional paper currency. One of the biggest drivers of the idea was a Facebook-led effort in 2019 to allow the use of a global payments network using crypto technology. Though the action didn't spread to the field of public use, it did provide an example of how the private sector could create a currency system outside of government control.

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So now, a few years later, central banks around the world have begun to explore the idea of announcing their own digital currency that would function in the same authority as their physical counterpart while also allowing some of the benefits of other cryptocurrencies.

That, nevertheless, could present an unwelcome game for banks by giving clients the option to store their money in multiple places. Hypothetically, a person or business could keep their digital dollars in a virtual "wallet" then transfer them straight to someone else without using a bank account. But unlike decentralized currencies like Bitcoin and Ether, the money would be financed and controlled by a central bank, wherein financial authorities could use their digital cash to guide policy decisions concerning interest rates.

Next month, the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology's Digital Currency Initiative will aim to publish the first findings of their work to see if a digital currency could work a practical level.

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