Amidst the reports of the damage the bill in the United States Congress is going to vote up, there is a beacon of hope in another area.
Central Bank Digital Currencies (CBDCs) seem to be the rage now. Many are reporting that most Central Banks are looking into them. China obviously is already rolling one out. Venezuela is also going bring one out in October.
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But what about the United States? We know Chairman Powell said they would be looking into it. Is this something they are seriously considering or is Powell playing the political game and putting forth some rhetoric?
The US Dollar is the world's reserve currency, hence it occupies a different position than the other fiat currencies, even the big four (EURO, JP, GBP, Yuan).
Many feel this is a foregone conclusion, but is it?
The Fed Might Not Be On Board
To me, CBDCs do not favor the Central Banks, especially one that is advanced as the Federal Reserve. While it is lacking in some areas from a technological standpoint, the payment system it has is rather advanced. Also, they have the ability to upgrade as more technology becomes available. In fact, there are already projects to speed up both domestic and international transactions.
CBDCs mostly benefit politicians and bureaucrats. They are meant to provide information about every transaction. Yet we see a variety of arguments put forth as to why the United States needs to do this.
Fed Governor Christopher Waller delivered a speech that provided a lot of insight into what some are thinking. To forewarn everyone, this is simply his opinion and he does not speak in any official capacity for the Fed. The one to listen to is Powell since he is shares the official position of the bank.
Nevertheless, this does show up what some of the thinking is among some of the members.
Waller looks at things from the standpoint of what does the Fed need to do for the market? What is in need of fixing?
What problem would a CBDC solve? Alternatively, what market failure or inefficiency demands this specific intervention? After careful consideration, I am not convinced as of yet that a CBDC would solve any existing problem that is not being addressed more promptly and efficiently by other initiatives.
His view is that the market is already providing an efficient system, especially when it comes to payments. The Fed and commercial banking system have safeguards in place to protect depositors against systemic failure. Obviously this is not true in every country but Waller feels it is within the United States.
He also disputed many of the arguments put forth as to why the Federal Reserve needs to adopt a CBDC. The biggest one is the idea that China is going to replace the USD as the reserve currency by jumping ahead with the digital YUAN.
Waller does not agree with this sentiment. Correctly, he knows that China will be very successful getting adoption within that country. The government can push it on the citizens. However, his question is how will it do outside of the country? Do foreign companies want the Chinese government seeing every transaction that takes place.
He doesn't think so.
Stablecoins
Of late, the esteemed former law-professor-turned-Senator, Elizabeth Warren, has attacked stablecoins as being a threat to the stability of the financial system. Waller disagrees with this sentiment. In fact, he has a completely different view on it.
Private currencies are not a threat to the monetary policy of the Fed. This is where the Governor veers. It is not competition for the Fed. Instead, it is actually enhancing the ability of the Fed to impact things across the globe.
Finally, could it be that new forms of private money, such as stablecoins, represent a threat to the Federal Reserve for conducting monetary policy? Many commentators have suggested that new private monies will diminish the impact of the Federal Reserve's policy actions, since they will act as competing monetary systems. It is well established in international economics that any country that pegs its exchange rate to the U.S. dollar surrenders its domestic monetary policy to the United States and imports U.S. monetary policy. This same logic applies to any entity that pegs its exchange rate to the U.S. dollar. Consequently, commercial banks and stablecoins pegged to the U.S. dollar act as conduits for U.S. monetary policy and amplify policy actions. So, if anything, private stablecoins pegged to the dollar broaden the reach of U.S. monetary policy rather than diminish it.
A bit different viewpoint than the Senator from Massachusetts is espousing. Remember, Waller is looking for advantages of CBDCs for the Fed, not the power that comes with them. Truthfully, the Fed is not concerned with the control over individuals or companies. It operates on a larger scale, looking at the economy in totality.
What is important is that he sees how the reach of the Fed's monetary policy is actually enhanced by stablecoins pegged to the USD. In this, it appears he is correct. By default, a peg is going to enhance that policy. This means stablecoins pegged to the USD are of benefit to the Fed.
Here we see where the Senator might have gone off the rails.
FedCoin Going To Be A While
What we can take away from all of this is that the implementation of a CBDC for the USD is going to take a while if it ever happens. Powell said they will discuss it and we can already see the counterargument to what is already out there.
There is also another factor in all this. The Federal Reserve is not allowed, by law, to open accounts for individuals. That is what the commercial banking system is for. Thus, it is literally going to take an act of Congress before this can happen. We know if the Fed is not on board, they will testify against it.
If there are others who view things the same way as Waller, the development that the private sector does is in alignment with what they seek. As long as technological progress is being made and the system is getting more efficient, the Fed is not going to stop that. Unlike Congress, they do not seek more power since their control of monetary policy is complete.
Politicians of course have a different view on things. They are power hungry and it is something that cannot be satisfied. Hence, they look at CBDCs as a way for them to amass more control.
Ultimately, the Fed might conclude that CBDCs truly are a solution in search of a problem.
To read the transcript of the speech, click here.
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I think the US need to develop their own CBDC if it doesn't want to be left out by China in the digital currency race.
Obviously you didnt read the article.
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In search of a problem? The problem is already there, you do not have to search for it. Cryptocurrencies, such as Bitcoin (BTC), are speculative instruments with little public use, but digital currencies issued by central banks (CBDCs) could form the backbone of a new digital payment system.
Stablecoins already solve that problem without the government intrusion.
Obviously you are okay with the likes of the Chinese or US governments knowing every single transaction that takes place.
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This may sound weird, but as long as they give a proper pension-like income, yes.
Nowadays I live in Hungary in financial discrimination.
This means that my pension-like income (for my multiple disabilities) is less than the half of the local minimum wage. My pension-like income is approximately $250 USD per month, but the local minimum wage is approximately $550 USD per month.
Seriously. Is this even legal?
I just read that they might have agreed on a favorable amendment. It is a good thing that I am here, in the past I would have thought that CBCD's were a good thing, but after reading all of the posts I understand why they are not as ideal as I first believed.
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Whatever the outcome, the fighting will continue since many sections of these bills end up contested in court.
It is good to see the cryptocurrency industry coming together. This shows that as we grow, more power will be in our hands.
Just have to keep pushing ahead.
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Yes indeed, having some power players on a cohesive front will hopefully steer the boat in the right direction!
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The FED will do things on its own timetable if it can help it. Sadly, Congress may disrupt that timetable and initiate a chain reaction which may be unstoppable. I'm no fan of the FED, at least the FED knows how to manage its self-interest in a sensible way. Congress, no way.
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It is going to be hard for Congress to push that through if The Fed is publicly against it.
There is also the commercial banking system to consider. That will be obliterated by a CBDC since there is little reason to keep money in a bank when there is a digital wallet.
The banking industry has a very powerful lobby.
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Obviously the politicians want the CBDCs so I think there will continue to be talks about it. It is surprising to see the Fed push back but I guess they want to maintain their control as well.
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In this instance, it is not the Fed but one Governor expressing his opinion. However, I am sure there are others who will bring up this discussion.
How high it reaches remains to be seen. But CBDC is not going to be an easy sell to the Fed.
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China is very aggressively testing and making CBDCs a reality. They have distributed millions of dollars worth currency among citizens. When it comes to high tech surveillance China has been what everyone including USSA is looking up to. The only way we can fight this is by making decentralized payments a mainstream reality.
We cannot achieve that with BTC because of high fees. So far Dash has been a perfect solution.
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Hive is a better solution. 😁
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I like that they consider stablecoins as private money and that they aren't a threat to the monetary system. Maybe that would go through? (excluding Elizabeth Warren's opinion) 😎
The Chinese aren't stupid and it is obvious what they want to achieve. The US needs to wake up as the Dollar could be easily replaced if they take too long as the digital Yuan makes business sense for trade.
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I am thinking of what will be the effects on decentralized crypto after these centralized cryptos and wallets are launched by the governments ?
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STOPamazing, will be earthy
Mass surveillance is going too far. Snowden is exactly right in saying that mass surveillance is both an ineffective way to accomplish its stated goal and a criminal intrusion into privacy, which is a human right. Let's say crypto were completely outlawed, physical cash were phased out and all transactions were thus made using a network under 24/7 surveillance and censorable, then we could say that freedom would be dead. What would be left? Barter? Physical gold?
I'd start seriously looking into going off-the-grid and outside the monetary system to the extent I could.
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