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Two U.S. congressmen have asked whether Federal Reserve Chairman Jerome Powell would consider issuing a national digital currency.
Representatives Bill Foster (D-IL) and French Hill (R-AR) wrote in a letter made public today that the emergence of digital currencies marked an “inflection point” in the evolution of money and payments. They expressed alarm at statistics that over 40 countries are currently in the process of developing their own digital currencies, and said failure to do likewise could undermine the “primacy” of the U.S. dollar.
“With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a U.S. dollar digital currency,” they said.
Citing former IMF chair Christine Lagarde, they suggested that a state-backed, digital alternative to fiat currencies would stem the control “private firms” have over the cryptocurrency micro-economy. “Relying on the private sector to develop digital currencies carries its own risks,” they said, “including loss of control of monetary policy, as well as the ability to implement and enforce effective anti-money-laundering and counter-terrorism financing.” The representatives also cited as a threat Facebook’s proposed “Libra” currency, which they said “could remove important aspects of financial governance outside of U.S. jurisdiction.”
Just yesterday, Philadelphia Federal Reserve President Patrick Harker proposed a similar project, calling on lawmakers to “start getting [their] hands around developing a digital currency. Others around the world have echoed the sentiment: as Hill and Foster themselves point out, countries including Sweden, Uruguay and China are all scrambling to roll out digitized versions of their national currencies. Bank of England governor Mark Carney, meanwhile, has suggested an interlocking network of national digital currencies to stand against the dominance of the dollar—more or less vindicating Hill and Foster’s sense of urgency.
As such, the two congressmen posed a series of questions to Mr. Powell: Is the Fed mulling or in the process of developing a digital currency of its own? Does the Fed have contingency plans against the threat posed by other digital currencies? What legal or regulatory hurdles would impede the development of such a currency, and what would the Fed stand to lose/gain? And what, if there were a U.S. digital currency, would the “design features” include, and why?
Let’s hope the email doesn’t bounce, eh?