Posted 1 year ago | by @devadmin
Jerome Powell has stated that a central bank digital currency (CBDC) won’t remove the need for physical cash in the near future. Instead, a digital U.S. dollar would work in tandem with the physical fiat version.
Powell repeated a key point made in a recent Bank for International Settlements report the Fed contributed to, stating, “One of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system,” Bloomberg reported.
Speaking to a payments conference in Basel, Switzerland, Powell added that the pandemic has prompted governments to think more deeply about how money works. “The Covid crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments,” Powell stated.
Although information on the Fed’s Digital Dollar tests are confidential and officially according to the Federal Reserves’ website they are still going through experiments “to enhance its understanding of the opportunities and risks associated with central bank digital currencies.” We can see that a company known as the Digital Dollar Foundation previously released a white paper on its Digital Dollar Project that outlines recommendations on how to create an American central bank digital currency (CBDC).
“The Digital Dollar Project (Project), a partnership between Accenture (NYSE: ACN) and the Digital Dollar Foundation, was founded in January 2020 to encourage research and public discussion on the potential advantages of a CBDC. The proposed pilots are the result of discussions, research and events that have taken place over the past ten months, as the progression of CBDCs has transitioned from “If” to “How” and “When,” the website reads.
At first, Powell said that he didn’t believe the private sector should have a role in designing a digital currency at the U.S. House Financial Services Committee hearing last year when questioned about the Digital Dollar Project directly, Forkast News reported.
However, the chairman of the Federal Reserve, later proclaimed the Fed is open to collaboration with private companies in creating a possible digital dollar, as Bitboy Crypto reported.
“We will have lots of conversations with industry and stakeholder engagement, and that’ll help us in our work on digital currencies and cross-border payments,” Powell said in an International Monetary Fund panel.
Powell said private sector initiatives like Facebook’s Libra (DIEM) project have accelerated central banks’ interest in setting up their own digital currencies or CBDC (Central Bank Digital Currencies.)
But Powell cautioned that the Fed faces “difficult policy and operational questions,” such as the monetary policy implications of a digital dollar. Powell also listed illicit activity and cyber attacks as risks.
“I actually do think this is one of those issues where it’s more important for the United States to get it right than it is to be first,” Powell said.
The U.S. has found itself trailing behind other countries that have either planned or launched a digital version of their currency.
For instance, the Bank of Mexico in 2019 launched a Cobro Digital (CoDi) system that allows users and merchants to transact in digital pesos using QR codes. As another example, the People’s Bank of China recently began user testing a digital renminbi, which would allow transactions even without connection to the internet.
Although, Powell said at the time that the U.S. Fed wasn’t working on a digital dollar at this time. Sources and information indicate that’s not the full truthful picture.
In fact, last year on June 30th, 2020, the Senate Banking Committee held a hearing on the future of a digital dollar, which means they are taking the digitization of the U.S. currency seriously.
Forbes reports some highlights from the hearing:
- Senator Tom Cotton (R-Ark.) stated, “The U.S. needs a digital dollar…The U.S. dollar has to keep earning that place in the global payments system. It has to be better than bitcoin … it has to be better than a digital yuan.”
- Chairman Mike Crapo (R-Idaho) expressed concerns of regulator oversight for stable-coins.
- Charles Cascarilla of Paxos testified advocating for stable-coins, stating that they address the “antiquated plumbing” of our financial system as well as financial inclusion. “Blockchain based stable-coins allow everyone access”.
- Nakita Cuttino, visiting assistant professor of law at Duke University, discussed the friction in the current payday cycle and the rising demand for costly advanced-payment apps which could be resolved with digital currencies. “In the absence of public policy addressing open access payments and real-time payments, low-income and moderate-income Americans will continue to have limited resources needed, whether by traditional fringe services like payday loans or some novel fringe service.”
- Former CFTC Chairman Chris Giancarlo and head of the Digital Dollar Project, emphasized the “social and national” benefits such as increased speed, lower costs and issues of financial inclusion. “Darwin said the most adaptable survive. And I think that is true when we transition to a new architecture. To adapt to it, will help bring benefits to the society at large.”
Last year, in March 2020, the U.S. Senate quietly introduced a drafted bill to create “digital currency accounts administered by the Federal Reserve.“ More recently this year, the Boston Fed one of 12 regional Federal Reserve banks has stated publicly that it was evaluating over 40 different blockchains to support testing a digital dollar, Coindesk reported.
However, it’s important to mention for readers that in 2016, more than 100 executives from some of the world’s largest financial institutions including Nasdaq, Citigroup Inc., Visa Inc., Fidelity, Fiserv Inc., Pfizer Inc. and others, gathered for a private meeting at the Times Square office at the Nasdaq. It was during this meeting that the executives tested digital cash and settlements. Four years later, about on track with the amount of time it takes to observe new innovations and develop technology, we are seeing many of these major companies jumping into blockchain and cryptocurrency.
Speaking of VISA, the payment company recently partnered with an Ethereum-based stablecoin project USDC to integrate the digital asset for payment for its more than 60 million-plus merchants as Bitboy Crypto reported. Similarly Mastercard its competitor has also discussed Central Bank Digital Currencies, with its CEO Ajay Banga; stating that he was bullish on CBDC technology. That’s not all though, VISA also applied for a digital dollar blockchain patent, which appears to be laying the groundwork for central banks to mint a U.S.-based digital currency, as Coin Desk reported.
Bitcoin is currently trading at [FIAT: $58,777.69] UP +0.2% in the last 24 hours according to Coingecko at the time of this report.