U.S. Central Bank Actively Looking At Having A Digital Dollar, Says FED Official
The race for fiat-backed stablecoins is catching up and now besides big organizations, even government institutions are actively working on it.
On Wednesday, October 16, an official from the Federal Reserve confirmed that the United States central bank is “actively looking and debating” the issuance of a USD-backed digital currency.
According to Rob Kaplan, the President of the Federal Reserve Bank of Dallas, the regulators and lawmakers have expressed worry over the U.S. Dollar losing its dominant position as the world’s reserve currency.
“We have not at the Fed decided to pursue or drive to develop a digital currency, but it’s something we’re actively looking at and debating,” said Kaplan.
The regulators are worried that if a digital currency developed by any big organization or a state-government gains massive adoption, then the interest for U.S. bonds would deplete with time thereby resulting in higher interest rates for the country’s national debt.
Over the last century, the U.S. has held a dominant position in global trade and commerce. Thus, many central banks across the globe hold the USD as its reserves.
Moreover, the U.S. national debt has reached a staggering $23 trillion at this stage. In such a case, if the USD were to lose its importance, the national debt can tailspin further.
According to Kaplan, the interest rates can surge by a massive $200 billion if the USD loses its reserve-currency status. In a word with CoinDesk, Kaplan said: “It just reinforces, the dollar may not be the world’s reserve currency forever, and if that changes, and you tack on 100 basis points to $20 trillion, with relatively short average life, that’s a lot of money. It’s $200 billion a year and all of a sudden we’ve got a tremendous problem here, so it’s something we’re watching very closely.”
Kaplan also spoke of the shifts taking place in global financial infrastructure and the rising competition. Besides, the rising tensions of the U.S.-China trade war has really forced U.S. lawmakers to thinks of other currency alternatives.
It is no hidden fact that China is actively working on its CBDC plan and could launch by the year-end. Considering such facts, Kaplan said: “People around the world are working real hard to try to find alternatives to dollars and dollar infrastructure because the more they’re invested in that, the more susceptible they are to sanctions, tariffs and what’s going on right now.”
Earlier this week on October 15, ex-chairman of the US CFTC - J Christopher Giancarlo - published an op-ed piece in the Wall Street Journal that the U.S. should seriously think of having a digitized cash token working on blockchain protocol to keep up with the changing digital era. He proposed having a USD-backed stablecoin used for daily transactions, domestically and globally.