Lawmakers Pen Down Concerns to the Fed Over National Digital Currency

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Two United States lawmakers have urged the Federal Reserve to evaluate the possibilities of creating a digital dollar currency.


House of Representatives members, French Hill and Bill Foster recently sent a letter to the Federal Reserve Chairman Jerome Powell, expressing the concerns they have on the implications the US dollar would face in a likely scenario where another country or private company develops a widely used digital currency. They asked if the apex bank was exploring ways to develop their version.

The details of the letter were first published by Bloomberg Law which recounts how the Fed possesses the right to create and oversee currency policies.

The congressmen wrote that the central bank of the United States had it on its jurisdiction to create a national digital currency. They added that they were worried that the importance of the US dollar could be put in a long-term danger by the adoption of digital fiat currencies across the globe. They wrote that the Bank for International Settlements carried out a survey and discovered that 40 countries across the globe have developed or are planning on developing a digital currency.

There have been demands for the global financial system to gravitate away from the dollar. Most peculiar of these calls was when the Bank of England governor, Mark Carney proposed that a digital currency supported by a basket of other financial instruments will assist nations in making this change.

According to the letter, Foster and Hill wrote that cryptocurrencies are presently used for speculative functions in the United States, but have the potential to function as the traditional currency of the future. Also, they wrote that the country shouldn’t depend on private corporations to create digital currencies.

The letter categorically made mention of Facebook’s cryptocurrency project, Libra. They wrote that if this project by Facebook gets implemented, it could eliminate vital aspects of financial administration outside of the United States jurisdiction.

The letter went on to cite recent efforts by private corporations like J.P. Morgan and Wells Fargo.


Further Suggestions

The letter articulates some concerns like what measures is the Fed taking to develop a digital currency, what backup plans the organization were taking if a digital fiat currency gains momentum, what legal or regulatory issues could impede the Fed from assembling a digital currency, what market threats could confront the Fed’s digital currency when it is released and finally, what were the advantages to taking on this project.

However, US Reps. Foster and Hill are not the only ones suggesting that the Fed looks into developing a digital currency. In 2018, former Federal Deposit Insurance Corporation Chair, Sheila Bair, likewise suggested that the Fed create its digital currency to prevent disruption from the private sector and other nations.

Nonetheless, the Fed is planning on creating a real-time payment system, although it is uncertain if the system is cryptocurrency-based.




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