The central bank admitted that it is looking closely at the development of cryptocurrencies. Its president, Jerome Powell, responded to congressmen that support a new form of money.
The US Federal Reserve system is analyzing the possible benefits, costs, and implications of issuing a new central bank digital currency or “crypto-dollar.” The President of the central bank, Jerome Powell, stated in a letter to two congressmen that, although no digital currency is currently being developed, the institution is carefully analyzing how such initiative would be applied in the world’s first economy.
Powell said that they are aware that several central banks worldwide are considering this possibility, but each has different realities, as does the United States of America. When addressing lawmakers French Hill and Bill Foster, Powell does not attack cryptocurrencies or their technological innovation, but rather is more concerned about the consequences that they could bring to the American nation.
The executive stated that the issuance of a central bank digital currency for general use would raise important legal, monetary policy, payment, financial stability, supervision and operational issues that should be carefully considered. However, he explained that the Federal Reserve will continue to analyze the possible benefits and costs of digital currencies.
Regarding the reach that cryptocurrencies such as Bitcoin have had in recent years, Powell said that the central bank is closely monitoring this development. In other words, the main financial figure of the United States is exploring whether it makes sense to issue a cryptocurrency, which could undoubtedly confront obstacles in Congress itself, the banking system and other regulatory entities.
Dollar Dominance
Powell responded to the congressmen 50 days after they both signed a letter in which they expressed concern that the US dollar would lose dominance over the cryptocurrency projects of other nations, among which they named Sweden, Uruguay, and China.
The legislators feared the possibility that the primacy of the US dollar may be in long-term danger from the widespread adoption of fiat digital currencies, whose potential development is not limited to smaller economies.
It is striking that the congressmen would be pressing for the United States not to be relegated in terms of the issuance of a cryptocurrency aimed at daily use, as is currently done with the dollar.
The officials’ uncertainties may have increased in recent months following the announcement by JP Morgan Chase Bank to create their dollar-anchored cryptocurrency, JPMCoin.
Another project is that of Wells Fargo, which seeks to accelerate international transactions between its branches, using a private blockchain called Wells Fargo Digital Cash. However, in this case, a stablecoin or anchored cryptocurrency is not used but tokenized dollars of which no further details were offered.
Another element that could have influenced was the presentation of Libra, the cryptocurrency released by the Libra Association led by Facebook, from which several of its partners have already withdrawn.
The president of the Federal Reserve of Philadelphia, Patrick Harker, said last October that, sooner or later, the United States will have to develop its cryptocurrency and estimated that in about five years the country could have its own payment system based on this technology.
It should be remembered that in August 2019 the Federal Reserve disclosed that it was advancing a project called FEDNow Service, a real-time mechanism to modernize the local payment system.
By Willmen Blanco
