Federal Reserve officials have long been divided on the matter of a FED digital currency.
On the one hand, it’d possibly undercut private alternatives and provide consumers with more banking stability. But on the other, it could mean diminished personal privacy.
We’re a ways away from solving this argument, but it’s important to remain in the loop. Read below to see opinions from both sides.
What Is The Feds Digital Currency?
The federal digital currency is essentially a digital dollar. It’s similar to China’s digital yuan and other government-issued digital coins issued in selected European countries. The digital dollar would trace to a central bank as opposed to private financial institutions.
FED officials have debated if the government should issue a central bank digital currency (CBDC).
Main Arguments For A CBDC
One of the strongest arguments for circulating a fed digital currency is that it’d potentially diminish the worth of private alternatives, like Bitcoin.
Federal Reserve Chair Jerome Powell stated a CBDC would do away with the need for cryptocurrency and stablecoin alternatives.
Other arguments include:
- Creating more stability for the consumer. Consumers would have the safety net of a central bank, which would end the age of bank charges for basic services.
- A CBDC will mitigate illegal activity. Other cryptocurrencies have come under fire for funding illegal activity with relative impunity to the perpetrators.
Many supporters also believe in the importance of staying up to date with crypto technology, even if indecision on implementing a CBDC remains.
Main Arguments Against A CBDC
There are plenty of Officials who are fully against creating a CBDC, despite other countries issuing their own.
Governor Christopher J. Waller thinks the potential benefits for a CBDC are overstated, and the associated risks could prove catastrophic. A main concern is how a central bank currency gives the Federal Reserve too much insight into private citizens.
Opponents also doubt a central bank’s ability to offer services the private sector cannot.
A few other oppositional talking points include:
- A period of economic instability as consumers rush to reallocate funds from traditional banks to a central bank.
- A central bank currency means diminish privacy. A CBDC would have a traceable presence, unlike cash and other cryptocurrencies. Features could identify users and track each payment, involving the government in private financial dealings.
- Serious funds and time would be required to create the regulatory laws and infrastructure necessary to support a Fed digital currency.
Wrapping Up — Where The Conversation Stands Today
As of now, the argument continues with no discernable answer to what the future holds for a CBDC. However, before any final decision, officials will take Congressional and public opinion into account.
As talks continue, we recommend keeping an eye and ear out for developments. It’s rumoured that the FED will reveal documents detailing an examination of digital coin usage on a federal level during this fall.