If you've been keeping up with cryptocurrency headlines lately, central bank digital currencies, or CBDCs, have likely caught your attention.
Following Facebook's ambitious launch of Libra, intending to become a globally-used digital currency, governments and central banks are prompted to assert monetary dominance.
In an effort to counter Libra's influence, CBDCs have been proposed, granting central and commercial banks authority over issuing currency and providing financial services.
While central banks like China’s People Bank of China While the European Central Bank and the Bank of Canada are delving into CBDCs, the Federal Reserve has maintained a more reserved stance.
Janet Yellen, the former Federal Reserve chair, was initially critical of the notion of a sovereign digital currency. Bitcoin Against this backdrop, some analysts believe it's inevitable for the Federal Reserve to adopt blockchain technology for the dollar.
There's a clear trajectory towards a digital financial landscape. Importantly, however, this shift is largely driven by private companies in the U.S., while the dollar remains a corporeal asset, as familiar as the elements.
Digital Dollar Is On Its Way
Anthony Pompliano, formerly of Facebook and now at Morgan Creek Digital, is challenging the notion of a wholly physical form of currency.
He argues for the U.S. to embrace a digital currency model to seize an economic advantage and captivate the global population.
He wrote in a recent newsletter Pompliano isn't the only voice calling for an American digital dollar. Congressman Warren Davidson, notable in crypto circles for his candidness, recently shared a provocative perspective on Twitter.
Consider the revolutionary impact if the dollar transitioned entirely into a digital token.
This idea finds support from Congressmen French Hill and Bill Foster, who urged Jerome Powell to consider the potential of a digital dollar. https://t.co/6EF2aojAFg
— Warren Davidson ???????? (@WarrenDavidson) September 27, 2019
Expressing concern that the U.S. Dollar's supremacy might be threatened by digital currencies, Hill and Foster referenced a study by the BIS showing many countries moving towards digital currency initiatives.
A digital dollar could be revolutionary, offering disintermediation, immutable ledger distribution, among other perks, according to Davidson.
Why CBDC?
CBDCs could mitigate privacy concerns and transaction costs, thereby streamlining financial dealings.
Hill and Foster link the demand for a Fed-issued CBDC back to the Libra project, suggesting it could preserve U.S. influence over monetary policies.
These potential advantages have led ING's chief economist, Mark Cliffe, to predict a G20 central bank rolling out digital currency within a couple of years.
Having tracked cryptocurrency trends since 2013, my work has appeared in top industry outlets. Besides writing, I contribute to HTC's EXODUS team and hold a modest Bitcoin stake. Reach me at [email protected]
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