A question is ringing through the minds of both the general public and regulators: Should the Fed develop a national cryptocurrency?
What Could the Fed Do to Improve Things?
We’ve discussed China’s plans to develop a state-issued cryptocurrency – likely a digital yuan – as a means of stabilizing its economy, monitoring people’s transaction histories and competing with the likes of Facebook’s Libra. Recently, Live Bitcoin News covered a new law passed in China that permits the digital yuan to move into the next stages of development, so we can assume that the country is very serious about developing this new system.
But seriously, should a state-run government really have anything to do with crypto?
There is both a good side and a bad side to such an idea. Let’s look at the obvious bad, and that is that crypto is designed to give monetary power back to the “little guy.” The people who use it… Those who are underserved (or not served at all) by traditional financial institutions.
Banks, for example, will often deny low-income persons access to appropriate financial products. If you’ve run up a heavy debt bill, or if you’ve had trouble making payments in the past, a bank may look at your history and decide against letting you into their little family if you’re looking to open a new checking or savings account.
Crypto, on the other hand, doesn’t look at your history. It is money designed to be used now. It is also decentralized, meaning no institution will be monitoring your activity. You’re behind the wheel and in full control.
At the same time, it can be argued that there is reason for the U.S. Fed to get involved in a national cryptocurrency project. That reason is competition. With countries like China looking to potentially initiate the digital yuan sometime in 2020 – along with Facebook’s Libra (an allegedly global digital payment system) – the U.S. is at risk of falling behind and losing financial power.
There is talk that the U.S. will potentially develop an entirely new digital currency that could even replace the U.S. dollar. There’re also rumors of a Fed-run national cryptocurrency exchange.
Maybe This Will Happen Regardless
Some believe that these projects are unavoidable. Federal Reserve Bank of Philadelphia President Patrick Harker expressed at a recent conference that he thinks it’s only a matter of time before the U.S. jumps on the national cryptocurrency train, explaining:
It is inevitable. I think it is better for us to start getting our hands around it.
Indeed, Harker has a point. As the most powerful nation on earth, the U.S. has taken on plenty of responsibility towards other nations, and the idea that it would somehow fall behind or fail in the latest financial regard is a scary thought not just for America, but for the globe.