Fedcoin: The U.S. Will Issue E-Currency That You Will Use
Fedcoin refers to cryptocurrency and/or protocol established by a central bank. National banks could forge their own ‘bitcoin’ with comparative ease and bitcoin consultants have sketched possible scenarios on how.
In “Some Thoughts on Fedcoin – a Fed backed cryptocurrency” (March 9, 2015), Albert Szmigielski suggests, “[T]he Fed should premine all the currency that they want to issue on a blockchain….A premine happens where all (or part of) the cryptocurrency is issued in the first block, the genesis block. Then the Fed would just exchange the fedcoin for a dollar each.”
In the article entitled “Fedcoin” (October 19, 2014), J.P. Koning speculates, “The Fed would create a new blockchain called Fedcoin. Or it might create a Ripple style ledger by the same name. It doesn’t matter which. There would be an important difference between Fedcoin and more traditional cryptoledgers. One user—the Fed—would get special authority to create and destroy ledger entries….The Fed would…provide two-way physical convertibility between both of its existing liability types—paper money and electronic reserves—and Fedcoin at a rate of 1:1.”
Koning draws upon the work of mathematician and economist Sina Motamedi for “a more technical explanation for how this would work in the case of a blockchain-style ledger.” Motamedi advises, “The simplest way for a central bank to create its own crypto-currency is for it to fork the Bitcoin protocol into a new protocol that is unchanged in every way except that, going forward, the central bank would set and adjust the block mining reward at its discretion…. [L]ike paper currency, the central bank’s crypto-currency would be both decentralized (in transaction) and centralized (in supply).”
Discussions have been encouraged by the attention governments are directing toward Fedcoin. When the Bank of England released a paper (February 2015) that addressed the subject, the bitcoin-processing company Payment21 was not alone in asking, “Bank of England: Why might central banks issue digital currencies?”
In America, similar scenarios occur. In June 2016, central bankers from 90-some countries met behind closed doors in Washington D.C. and conferred with bitcoin experts. Federal Reserve Chair Janet Yellen opened the conference, which included the International Monetary Fund, the World Bank and Bank for International Settlements.
Adopting blockchain as a protocol to facilitate bank transfers was the focus but issuing ‘official’ digital currencies was actively explored. Adam Ludwin, CEO of the blockchain company Chain, delivered a speech entitled “Why Central Banks Will Issue Digital Currency.” Ludwin urged governmental attendees to use the revolutionary shift to create new assets for themselves.