Fed Requested by Congress to Consider Developing a Digital Dollar

Neil Dennis

U.S. Federal Reserve chairman Jay Powell has been asked by two Congressmen to consider developing a national digital currency.

In a letter dated September 30, French Hill, member of Congress for Arkansas, and Illinois Congressman Bill Foster, began by saying the nature of money is changing. The letter continued:

With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a US dollar digital currency.

Primacy of the Dollar

The two lawmakers said they were concerned that the primacy of the dollar could be in long-term jeopardy as other countries, including Sweden, China and Uruguay, and private sector companies such as Facebook and JPMorgan, developed competing digital currencies.

Their letter concluded with six questions they wanted the Fed chairman to answer:

  1. Is the Fed exploring the development of a dollar digital currency?
  2. What plans are the Fed making to respond if digital fiat currencies and their private sector equivalents begin to gain traction?
  3. What legal, regulatory or national security issues would prevent the Fed's development of a digital dollar?
  4. What benefits or detriments do you see the Fed incurring in developing a digital dollar relating to its mandate and policy goals?
  5. What are the market risks in the development - or failure to develop - a national digital currency?
  6. What design features would have to be considered?

 

There may be reason for the lawmakers to be concerned, as some have called for a global digital currency to replace the U.S. dollar as the world's reserve currency. Specifically, Mark Carney recommended replacing the dolalr with a "Libra-like" digital currency.

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