US Federal Reserve Starts Looking Into Digital Currencies

The time’s finally here. The United States’ Federal Reserve has revealed that the group is currently studying the feasibility of issuing a US-backed digital currency. The announcement of this news was made by Governor Lael Brainard, who announced it on Wednesday.

Maintaining USD Dominance

Brainard spoke during a conference happening at Stanford Graduate School of Business, talking about payments in particular. She explained that the USD serves an essential role across the globe. Thus, Brainard reasons that the country needs to stay at the frontier of policy development and research when it comes to Central Bank Digital Currencies or CBDCs.

Brainard explained that the Federal Reserve was starting to conduct experimentation and research when it comes to distributed ledger technologies. Specifically, this technology’s possible use in the creation of digital currencies, CBDCs in particular.

A Push To Study New Technology

Her announcement that the US is actively taking part in the crypto race comes after several of the world’s leading central banks have already announced their studying of crypto to issue a CBDC. As one would imagine, launching these advanced forms of currency would severely dampen the USD supremacy when it comes to global trade.

Brainard explained that the transformation of payments that digitalization offers allows for potential in greater convenience and value delivery at a reduced cost. Brainard made these statements when she cited the benefits of going digital.

The Great Libra Scare of 2019

Brainard explained that it was none other than the Libracoin that caused the collective kick in the pants to start the project. Facebook’s libra raised quite the alarm due to the potential privatization of the monetary system.

Brained explained that Facebook holds an active user base of a third of the world’s population. With the company’s attempted stablecoin project mostly being blown out of the water due to massive government backlash, the existence of the project has induced a great sense of urgency. Debates started to rise about what money’s form, issuer, and ledger system can be in this new modern era.

Growing Pains of Innovation

Brainard explained that investigations needed to be done by the monetary regulator are several. The most prominent is the cost reductions that CBDCs offer, as well as an operational vulnerability that might show its ugly head. Further issues are the categorization of banks and other financial institutions capable of offering digital currencies, as well as the risk of general instability caused by the change.

China’s still in the lead, having launched its pilot program, but its European counterparts are catching up quickly enough. Only the US has been lagging, putting its cherished USD supremacy in serious jeopardy.

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      A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.