Despite bitcoin’s recent plunge, it’s not a paragon of the crypto industry, with the federal government looking to hop on board the hype train with its own digital version of the dollar.
Amid worries of rampant inflation, there’s room to mull over a digital greenback. The Fed said recently that it would release a report delving into the intricacies of such an idea, which was introduced last July.
“There’s room for privately issued stablecoins to exist alongside a possible central bank digital currency, according to Federal Reserve Chair Jerome Powell,” Bloomberg reports.
“The Fed plans to publish a report on digital currencies in the coming weeks, Powell said at a Senate Banking Committee hearing on Tuesday,” Bloomberg adds. “The central bank hasn’t said whether it plans to launch its own digital dollar akin to efforts underway in other counties such as China. The Fed and other U.S. watchdogs have previously said stablecoins need more regulation and should be issued by banks.”
They’ll probably be watching how China continues to roll out its digital version of the currency: the yuan. Per a CNBC report, China is already taking steps to roll out the digital yuan, which won’t be an easy feat given its vast population.
In addition, China’s digital yuan will face stiff competition from tech giants like Alibaba and Tencent Holdings. The two already have a substantial market share with its own mobile payment systems.
Digital Dollar Faces Political Headwinds
Back in the U.S., a digital version of the greenback will face political headwinds. Detractors of the idea don’t want the U.S. turning into China in terms of mimicking an authoritarian stranglehold on its citizens.
“Requiring users to open up an account at the Fed to access a US CBDC (central bank digital currencies) would put the Fed on an insidious path akin to China’s digital authoritarianism,” said Minnesota Republican Representative, Tom Emmer, in a statement. “It is important to note that the Fed does not, and should not, have the authority to offer retail bank accounts.”
Fed Chair Powell, however, paints a more positive picture where CBDCs can work alongside decentralized cryptocurrencies. The digital dollar would operate in the same manner as stablecoins, where they mimic fiat currency in terms of stability, but execute with the speed of digital currencies.
“We think it’s really important that the central bank maintain a stable currency and payments system for the public’s benefit. That’s one of our jobs,” Fed Chair Jerome Powell said.
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