Earlier this year, the Governor of the Bank of England made some interesting comments with regard to Project Libra, an effort by Facebook to develop a digital currency that would be pegged to the exchange value of major fiat such as the United States dollar and the euro. Governor Mark Carney suggested that the dominance of the greenback should not be taken for granted, particularly at a time when emerging currencies such as the Chinese yuan are angling to increase global circulation. In other words, Carney sees a decentralized digital currency as a better option.
According to Simon Potter, an American economist who previously served in the Federal Reserve, the idea of replacing the dollar with cryptocurrency tokens is nonsensical. Potter believes that the management of digital currencies such as Bitcoin is overly complicated when compared to the established currency reserve system of the U.S., a country still considered to be the largest economy in the world. The liquidity of the greenback is undeniable, and there is no question that its global circulation makes it an economic leader, particularly when central banks around the world do not need to coordinate with each other in terms of building up reserves.
Potter is not an outright detractor of cryptocurrency; he actually believes that the private sector could create fresh capital markets with a single digital currency, and this is something he believes central bank officials should pay greater attention to. With a token such as the USD Coin, which is developed by investment banking giant Goldman Sachs, financial services providers and institutional investors could create entire markets that operate without the need of a government-controlled currency.
For his part, Carney is more open to the idea of a digital currency potentially supporting an entire financial system. In the case of Facebook, for example, Carney sees a future when individuals no longer want to deal with banks and traditional payment systems such as Visa and MasterCard. The idea of managing digital cash with mobile wallets is highly attractive, and it could empower people who have been left out of the banking system for various reasons.