Fed weighs on digital dollar

The chairman of the US Federal Reserve System announced plans to explore the possibility of launching a digital dollar to reduce the participation of stablecoins in the US money supply.

Speaking at Congressional hearings, Federal Reserve Chairman Jerome Powell said that one compelling case for issuing a digital dollar is to meet the current demand for private alternative currencies such as cryptocurrencies and stablecoins.

“That, in particular, you wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency – I think that’s one of the stronger arguments in its favor.”

Powell said the Fed will publish a detailed report on existing digital assets, cryptocurrencies and stablecoins by September. As a result of the study, the Fed will be able to decide whether it makes sense to consider the possibility of issuing a digital version of the US dollar.

Powell reiterated his view that for the United States, as the holder of the world’s reserve currency, it is more important to “get it right” than to act quickly.

Powell also noted that he was skeptical about the predictions of crypto assets becoming the main means of payment in the United States. But he believes stablecoins may become even more popular over time. However, he said more regulation is needed before stablecoins can take on a larger role in the financial system.

“We have a pretty strong regulatory framework around bank deposits, for example, or money market funds. That doesn’t exist currently for stablecoins, and if they’re going to be a significant part of the payments universe – which we don’t think crypto assets will be but stablecoins might be – then we need an appropriate regulatory framework.”

Powell’s announcement comes a month after Fed Governor Lael Brainard said in May that a fragmented payment system that uses too many stablecoins could be harmed by a fragmented payments system that featured too many stablecoins.

Today, the US dollar remains the world’s main reserve currency and the preferred means of payment for international trade and financial transactions.

Bloomberg notes that the strongest opposition to a virtual dollar will come from U.S. banks. They rely on $17 trillion in deposits to fund much of their core business, profiting from the difference between what they pay in interest to account holders and what they charge for loans. Banks also earn billions of dollars annually from overdraft, ATM, and account maintenance fees. By creating a digital currency, the Federal Reserve would in effect be competing with banks for customers.

In a recent blog post, Greg Baer, ​​president of the Bank Policy Institute and former assistant to the Treasury secretary in the Clinton administration, warned that it would be more difficult and expensive for home buyers, businesses, and other banking clients to borrow money if the Fed encroached on commercial banking.

Via: 2Coinfox.info

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