What a Digital Dollar looks like…
We are on the cusp of a new monetary era. Central bankers around the world are increasingly worried that privately controlled digital currencies will relegate them to the sidelines of monetary affairs. To avoid this fate, central banks have been studying, and in some cases actively pursuing, issuing digital currencies of their own: so-called central bank digital currency (CBDC).
Today’s tech giants have the scale and consumer reach, not to mention the incentive, to create their own digital moneys that threaten to compete with or even displace the public moneys that central banks issue and manage.
The Peoples Bank of China is reportedly poised to launch its CBDC as soon as this year. If it succeeds, other major central banks are sure to follow. The stakes are especially high for the United States because a successful digital currency—whether controlled by a private company or by China—could imperil the U.S. dollar’s status as the dominant global currency, a source of “exorbitant privilege” for Americans.
Congress should authorize the Federal Reserve to implement a broadly accessible, U.S. dollar-based CBDC by giving the general public—individuals, businesses, and institutions—the option to hold accounts at the central bank, which we call FedAccounts. FedAccounts would offer all the functionality of ordinary bank accounts with the exception of overdraft coverage. They would also have all the special features that banks currently enjoy on their central bank accounts, as well as some additional, complementary features. The FedAccount program would put government-issued digital or “account” money on par with government-issued physical currency, transforming digital dollars into a resource that anyone can use.
The technology behind the digital dollar would be HyperLedger DLT, being designed to be fungible, meaning regardless of what central bank might end up minting its currency using the technology, every token will have the same value as the underlying asset, regardless of whether the token had been previously used for some nefarious purpose and will comply with the ERC-1155 token standard.
When it comes to money and payments, integration and interoperability are demonstrably better than fragmentation and balkanization. On top of that, distributed ledger technology, however ingenious its conception, remains extremely slow and inefficient compared to centralized ledger systems. For central banks, these cryptocurrency design features are a needless distraction.
The FedAccount system would be seamlessly interoperable with the existing system of money and payments and would rely on low-cost, reliable systems and technologies that the Federal Reserve has used successfully for decades. It would not charge interchange fees on debit card transactions, FedAccounts would reduce or eliminate an implicit tax on retailers and consumers.
The Digital Dollar effects on Bitcoin
Important to keep in mind. Bitcoin has the lead and will continue to have the lead in the digital currency space. The creation of the Digital Dollar at its core and infrastructure level isn’t really a challenge for Bitcoin. Bitcoin wins hands down.
China’s digital yuan has been in the works since 2014. The launch date, however, still remains unknown but is expected later this year. Industry insiders told The Global Times that China should accelerate the launch of its digital currency amid the coronavirus pandemic and economic slowdown. This will be Bitcoin first major test.
People’s Bank of China Digital Yuan, United States of America Digital Dollar, Bitcoin and other crypto currencies. Currency Wars are upon us.
What happens to cash when the digital dollar is created, does it become worthless. Will we continue on using the same fiat money system that hyper inflates the digital dollar as well.
Currency devaluation, or debasement, has always been synony…
