In the News

U.S Federal Reserve Urged to Create National Digital Currency for Effective Financial Policy

Coinspace
10/03/19

Cryptocurrency has posed a major challenge to governments around the world, most of which are looking for means to stay on top of their game and compete favorably with the technology. The primary way to deal with this is to create a national digital fiat currency which will ensure that the country keeps pace with the evolving financial technology.

China, one of the world’s largest economies and U.S’ top trade rival has already started the process of creating one such digital currency which is to be launched by next year 2020. Several other countries are also either already working on a digital currency or they are considering it, according to a report from the Bank for International Settlements (BIS), but the United States has been reluctant about it.

Time to take a stand
The United States, through its SEC has not been the most friendly towards cryptocurrency. Several key personalities in the government have called for a ban on Bitcoin and other cryptocurrencies, claiming they seek to undermine the country’s financial system. However, two congressmen,  Rep. French Hill (R-Arkansas) and Rep. Bill Foster (D-Illinois) believe creating a national digital currency is a better way to deal with the situation. 

The two lawmakers have called on the U.S Fed to create a digital USD that will be used officially as failure to do that could snatch the control of monetary policy from the government. This is majorly because of the growing interest in the use of digital currencies for transactions and the concerns have been worsened by Facebook’s move to create Libra, a digital currency that is likely to compete favorably with the U.S Dollar. This move has raised a lot of concerns particularly among the lawmakers who have been really tough on the move, but the government is reluctant about having a digital currency.

Central Bank looking elsewhere
This is not the first time the Fed has been asked to create a digital currency for the country. Just last year, Sheila Bair the former US Federal Deposit Insurance Corporation (FDIC) chairperson encouraged the Fed to world on developing a digital currency for the country. Of course the Fed did not pay attention as up to now there is no sign of efforts to launch any digital currency. 

The Fed is rather, planning to launch a payment system known as FedNow that will facilitate cross-border payment in real time and the aim is to compete favorably with Wall Street banks. While this is a welcome development to improve payment services of the banks, it still does not replace a national digital currency.

The Fed is however obviously not keen on launching a digital currency and the SEC is still not very friendly with cryptocurrency either. If things don’t change soon, U.S competitors may be making head way with the adoption of digital currencies to grow their economies while the U.S lags behind as the world turns into one where digital money is the norm.