Federal Reserve Considers ‘FedCoin’ Digital Currency

#OhNoCrypto

The US Federal Reserve (Fed) is the latest major central bank to consider issuing its own digital currency. Last month, its European, British, and Japanese counterparts formed a group to study the benefits of the so-called central bank digital currency (CBDC). Governor Lael Brainard Admits the US Central Bank is Looking into CBDCs More than a decade ago, no one would have believed that Bitcoin, the newly created virtual currency underpinned by blockchain, would trigger major changes in the financial world and would force central banks to accommodate to the new circumstances. However, this is exactly what happens. Blockchain adoption went so far that the Fed itself is thinking about issuing its own digital currency, dubbed ‘FedCoin’ by Reuters. Governor Lael Brainard said yesterday that the American central bank was analyzing multiple issues related to digital payments and currencies, including policy, design, and legal consequences of potentially issuing its own digital currency. She said during a conference at the Stanford Graduate School of Business: By transforming payments, digitalization has the potential to deliver greater value and convenience at lower cost. She expressed worries that some entities that intend to issue global digital currencies are outside of the regulatory horizon. The official was probably hinting to Facebook and its Libra stablecoin. Some of the new players are outside the financial system’s regulatory guardrails, and their new currencies could pose challenges in areas such as illicit finance, privacy, financial stability and monetary policy transmission. She mentioned that the Federal Reserve was working on its own real-time payment and settlement system. Currently, the bank was reviewing 200 comment letters that touch upon the proposed structure and objective of the service. Besides this, the central bank is also “conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC,” the Governor stated. Federal Reserve Makes U-Turn in Less than Two Years Interestingly, the Federal Reserve said in 2018 that there was no point in issuing its own digital currency. Ironically, Governor Brainard was also among those who voiced the central bank’s position on the new trend. Back then, the Bank of England and the Bank of Russia were the only major central banks to endorse CBDCs. Now the Fed is in a rush to adopt the concept, especially after People’s Bank of China (PBOC) announced similar intentions. Brainard said yesterday: Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding central bank digital currency. Facebook’s Libra Alarmed Central Banks The main reason why central banks, including the Fed, have become so frenetic at pushing their own digital currencies is that Facebook’s Libra could undermine their influence at a global level. In June 2019, Facebook announced for the first time that it planned to launch a global digital currency. The stablecoin will be pegged to a basket of fiat currencies and US Treasury securities. Central banks and governments across all continents openly opposed the social media giant, fearing that a global coin in the hands of two billion people could undermine the financial stability in their own jurisdiction. Fed officials repeatedly expressed worries that Libra could threat consumers’ privacy and protections. Yesterday, Brainard said that Facebook’s Libra project pushed central banks to join discussions around digital currencies. We are collaborating with other central banks as we advance our understanding of central bank digital currencies Last month, former Bank of Japan executive Hiromi Yamaoka also admitted that the challenge posed by Libra caused major central banks to form the new group to study CBCDs. “The latest decision (by the BoJ, BoE, ECB, and three other central banks) is not just about sharing information. It’s also an effort to keep something like Libra in check,” he told Reuters. The post appeared first on Bitcoinist.com.

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