The Biden administration is supporting the development and research of a “US Central Bank Digital Currency,“. The move is part of a broad executive order signed by President Joe Biden on Wednesday, which directs the federal government to take action on potential uses and regulations for digital content such as cryptocurrencies.
The executive order states that the administration puts the highest priority on development and research efforts into the promising design and deployment options of CBDC.” The order directs a number of agencies to start research and report back on a range of issues covering digital currencies, including design and security, as well as financial and societal implications.
A senior administration said on Tuesday that they understand the implications of possibly issuing a digital dollar and they’re extremely broad. Although a digital currency in the United States would not necessarily change everyday experiences such as buying products and services, economists believe it could change commercial and central banking, as well as banking accessibility, taxes, and government sanctions, “The potential is huge, and it’s very fascinating,” said David Yermack, a professor and head of New York University’s finance department.
According to a fact sheet released by the White House, the executive order might very well direct the government to take action on the technical requirements for a digital currency and endorse for the Fed. to continue its research and development. In January, the Federal Reserve released a white paper on the purpose of setting up a CBDC to supplement existing payment systems.
It found that while a CBDC can make it less costly and easier for consumers, it could also jeopardize the financial system’s stability in the United States. The administration also stated in its fact sheet that it would “minimize the illegitimate finance and national security risks posed by the illicit use of digital assets by trying to direct an unparalleled focus of coordinated action across all relevant agencies under US government to lessen the risks.”
Have a peek at: The Whitaker Family: The Haunting Effects of Inbreeding
Biden Takes a Big Step Toward Digital Currency in the U.S.
The United States will not be the first country to use digital money. Many other countries have either rolled out or are developing digital currencies, including China, which has introduced its own CBDC and has over 140 million people who have opened digital “wallets.” The Bahamas’ Sand Dollar is one of the most popular digital currencies in the world.
The Biden administration’s move, according to Yermack, demonstrated the enormity of the broader shift toward digital currencies. He stated, that it is not a question of if, but when.” “It’s pretty much game over once the central banks start co-opting the technology.”
While the administration preliminary report did not want to get into detail about how a digital currency in the United States might work, Yermack suggested that the implementation can be fairly straightforward, with exchanges flowing directly to and from the Fed, bypassing banks and payment systems and allowing for near-seamless cash flows.
It’s a fairly straightforward process with far-reaching implications. According to Yermack, a widely adopted digital currency would raise existential questions for banks and other financial services that enhance payments. Yermack said Bill Gates banking will always exist, but banks will not,”.
Michael Bordo, a professor of economics and the director of the Center for Monetary and Financial History at Rutgers University in New Jersey said that digital currencies open up new possibilities for how the government conducts policy.
He believes that a digital currency can maybe make stimulus payments like those made during the coronavirus pandemic near-instant and much more effective, potentially trying to reach people who have previously been unable to access banking services. Bordo cited the digital currency in the Bahamas as an example of how the unbanked can profit.
“They found that it worked, and they developed ways to make it really simple,” Bordo explained. “There are indeed a lot of really low-income people who don’t have bank accounts.” Aside from the consumer benefits, a digital currency in the United States could provide Federal Reserve with a new tool that economists have only speculated about: negative interest rates.
The Fed’s major instrument for enhancing or cooling the economy is interest rate control, but it has its limitations. The zero bound constraints how low banks can cut interest rates on regular money, leaving central banks with few possibilities when interest rates are already lesser and the economy needs a boost. The zero bound doesn’t really occur with a digital currency, allowing for more extreme action when necessary.
“If your money is electronic, the government can easily erase 2% of it every year,” Yermack explained. “I believe it’s going to become a requirement simply due to global demographic changes.” Negative rates, according to Bordo, are an essential characteristic of digital currencies.
Have a peek at: First Look at Creed III Returning to the Ring for Michael Jordan
“I believe it has the potential to be a game-changer for the Fed,” he said.
Despite all of the conceptual possibilities, a digital currency in the United States faces a variety of real obstacles. Commercial banks, according to Bordo, have such a strong interest in opposing the technology. “It’s going to be a huge project to get this thing through,” he said.
Nonetheless, the popularity of government-handled digital currencies is increasing. According to Yermack, he has recommended major governments interested in launching their own currencies, and as more countries do so, “the others will probably stay in line pretty quickly.”
“Everyone laughed at this two years ago,” Yermack said. “It’s the in thing right now.”
So do comment down below and let us know your views about this digital currency. Stay tuned with us for all such amazing updates about you all the recent news.