After many rumors surrounding the matter, it has finally been confirmed that several Federal Reserve (FED) banks in the United States are actively working on a digital dollar. Which would include the North American country in the race to launch its own government virtual currency. Following the path traced by other governments such as China.
The importance of a digital dollar
Unlike other high-tech sectors, the US government so far appeared to be lagging behind when it comes to digital money. Well, while technologies such as artificial intelligence or 3D printing, can be developed independently by the private sector. Digital money is an exclusive matter for governments.
Thus, when a consortium of companies led by Facebook recently tried to create its own business virtual currency. All the governments of the world, including the United States, immediately expressed their rejection of the idea. Accelerating the trend that already seemed to be dominant towards the creation of government virtual currencies.
However, it wasn’t until now that, during a speech at the Chicago Payments Symposium, Cleveland Fed President Loretta J. Mester confirmed that a digital dollar is actively being worked on. Giving details about the form that this virtual currency could have.
What is the Fed working on?
According to Mester, at this time there would be several simultaneous initiatives for the creation of the digital dollar. Including the technology lab of the Fed’s Board of Governors, called Techlab. Which has been experimenting with different technologies for the creation of virtual currency. As well as the FEDs of Boston and New York, working with the Massachusetts Institute of Technology and the Bank of International Settlements, respectively.
«It has been proposed that each American have an account in the FED in which digital dollars can be deposited, such as obligations of the Federal Reserve Banks, which could be used for emergency payments (…) Other proposals would create a new payment instrument, digital money, which would be the same as physical currency issued by central banks today, but in digital form and potentially without the anonymity of physical currency«Added Mester.
Therefore, at this time the final form that the digital dollar would have would not be known. Evaluating in the FED the risks and opportunities that the government virtual currency would have for the US economy. Especially on “financial stability, market structure, security, privacy and monetary policy.”
Ultimately, however, if the digital dollar becomes a reality, it would have multiple advantages for the United States. Since including the country again in the technological competition with China for digital money. Even, as Mester put it, allowing the Fed to execute “faster and more ubiquitous payments in times of emergency and more generally.”