Just a few years ago, it would have sounded absurd for the United States Federal Reserve to seriously consider an official dollar stable coin. Now it might be. Markets are getting more guidance from the Federal Reserve on cryptocurrencies lately. Two United States Representatives, French Hill and Bill Foster, are leading the way. They contacted Federal Reserve Chairman Jay Powell about it.
Blockchain has infiltrated most of the global financial sector. Some of it is still experimental, but people are up to the challenge. One of the biggest events that has spurred the interest of Foster and Hill is China's announcement that it is going to launch a digital currency. Foster and Hill do not want the United States to fall behind.
Facebook's Libra also cannot be ignored. Its underlying premise is enough to wake up lawmakers and regulators who are generally slow to embrace new technology and ideas. If the federal government does not take action in order to permit immutable cryptocurrency transactions, private companies will do it. Chairman Powell recognizes this. A cryptocurrency and finance expert adds that federal bankers now realize that they have to consider the developments and their potential implications.
Powell wrote a letter to Foster and Hill and said that the agency does not currently have a plan to make a central bank digital currency. He added that it would involve a lot of legal, monetary policy, financial stability, payment policy, supervision and operations questions.
A federally-backed digital currency could add a lot of advantages to how money is used. People might not have to deal with as many middle men if the federal government operated a digital ledger. The government would be in charge of the data.
A United States national stable coin would likely be a token based on blockchain. It would also be backed by the Federal Reserve on the American dollar. Eventually, other currencies could get tokenized. A person could convert their money from a dollar stable coin to a Euro stable coin without the currency exchange fees. The Federal Reserve might link interest rates and fees to digital money.