Washington, D.C. (Washington Insider Magazine) – The Federal Reserve is taking a significant step toward making a virtual currency. It would give millions of low-income Americans “access to the financial system and fortify the dollar’s status as the world’s reserve currency.”
Making a digital version of the U.S. dollar bill has attained bipartisan interest. Even lawmakers who are considered diverse, such as Senator Elizabeth Warren (D-Mass) and Senator John Kennedy (R-La.), are interested. The real interest lies in the fact that it has potential benefits for low-income families who don’t have a bank account. There is a strong “pushback,” however, from banks.
The American Bankers Association said in a statement this week, “The benefits are theoretical, difficult to measure, and may be elusive, while the negative consequences could be severe.”
There has been a huge rise in recent years of the “private cryptocurrencies.” This has urged the Federal Government to think about a digital dollar “used alongside the traditional paper currency.”
A Facebook-led effort was launched in 2019. It was developed to “build a global payments network using crypto technology.” This actually showed how “the private sector” could theoretically make a “massive currency system outside government control.”
World-wide banks have been looking into the idea of digital currencies. They would operate “more like physical cash” and would have a few of the “same technological benefits as other cryptocurrencies.”
Banks would feel the competition because if would offer depositors another “safe place to put their money.” A person or even a business “could keep their digital dollars in a virtual wallet and then transfer them directly to someone else without needing to use a bank account.”
However, there are differences from other crypto assets, such as Bitcoin or Ether, because “it would be directly backed and controlled by the central bank.” This would allow monetary authorities to use it, similar to any form of the U.S. dollar.
Fed Chair Jerome Powell has said that “it will likely be up to Congress to ultimately decide whether the central bank should formally pursue such a project.” Lawmakers are interested since China has made steps to “build its own central bank digital currency.”