Ex-FDIC Chair Wants Federal Reserve Bank to Issue Digital Currency
The volatility of bitcoin and crypto make it inconvenient as a method of payment in transactions. This means you could be paying for something but the bitcoin you just used might double in value in a short time. On the flip side bitcoin could drop by half it's value, and as someone accepting bitcoin as a payment, you might lose half your money.
Bitcoin has not gained traction as a payment system because of this. This is where central banks want to try to capitalize on the digital currency market and make their own digital money. Support is growing for digital currency, and former Federal Deposit and Insurance Corporation chair Sheila Bair is pushing for central banks to provide stable digital currency. Unlike the volatility crypto, it would be more stable like fiat is, where people trust in the consistency of the value.
Source
Digital money could lessen the risk of a financial crisis and provide better monetary policies, but it also has the risk of undermining credit availability since banks use deposits to create money as loans. when a financial crisis occurs, like the subprime mortgage in the U.S. or the debt criss in Europe in 2008, people make a run on the bank to get their money out. This outflow disrupts the flow of pay payments and can liquidate banks.
Everyone's money isn't really in the bank, it's only there in a ledger. The bank can doll out cash because not everyone wants all their money at once. Converting cash to digital currency would prevent this problem of banking instability, as they don't need cash on hand. A digiital currency would greatly reduce costs and inefficiencies like printing money, depositing cash, processing cash, paying bills with cash or checks. Fees would also probably go down.
A "FedCoin" that had interest attached to it could permit the Fed to raise interest rates when the economy is overheating, and lower the interest on the currency during recessionary times to motivate people to spend and stimulate the economy.
But this coin could disrupt the availability of credit in the system. With more than $10 trillion deposited in bank accounts used to create loans to lend out, it could all disappear if people moved their accounts to a FedCoin. To prevent everyone from jumping on the new bandwagon all at once and creating this mass withdrawal of deposit accounts, the FedCoin could be limited, so as to make converting all money impossible.
The private sector digital currencies of crypto are not being attacked though. Bair has previously said she is against banning bitcoin, and even admits the only value any money has is based on belief, trust, loyalty and faith in it having the value it does, not on physical properties:
"I don’t think we should ban it – the green bills in your pocket don’t have an intrinsic value, either. The value is based on what others think is its value. That's true of any currency.... Let the market figure out what it’s worth. That is what it is doing now."
The Federal Reserve Bank and other central banks are faced with emerging technology that they can adopt or ignore. If they fail to stay ahead of technology then they can be left in the dust with instability on the markets growing. Digital currency might be a way for them to stay relevant and keep the existing economy afloat, despite the illusory bubbles we are in.
The housing bubble is still there again, and the derivatives market of over $500 trillion hasn't been called yet. This is more money than exists in the world. Once the bubbles of the traditional financial system pop, crypto might be the only one left standing up.
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A few years ago it was called cashless society.
Most sovereign currencies are already mostly digital, so what does it mean to issue a digital currency?
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In my opinion i explain this in simple terms.
Centralised Digital Currency
Currency - May be fast - May be mass adoption - but yet Centralisation, so no control over the system
Decentralised Digital Currency (Crypto)
Currency - May be fast (depends upon Blockchain and Network Speed) - Decentralised and end user is own banker and controller
So in my opinion the centralised digital currency can be successful but the end user will not hold the control because who knows we can face the digital demonetization and then we cannot use our own money and this happened many times in history when it comes to centralised Fiat money.
Cryptocurrency is volatile and it's Infant idea in the market and prices can disappoint and excite people but the great thing is it's core idea is Decentralisation and end user is owner and one more greatest thing is, we saw many communities who are coming forward and launching their own coins to develop their own communities and Cryptocurrencies are spreading great vibes in Third-world Countries where no Centralisation brought life.
Thanks for sharing this post with us and wishing you an great day. Stay blessed. 🙂
Yeah, unfortunately, most people don't care about that and just want convenience so they will be fine with centralized digital money :/
Convenient without using any mind will take out our true convenience one day. 🙂
The instability and lack of diversity in who holds Bitcoin are it's two biggest problems. For a cryptocurrency to succeed in the long-run it must not only be universally accepted it must be fairly distributed-at least to those who have the power to back it up.
So how does that problem get resolved? Will it ever? Doesn't seem like it...
Don't think Bitcoin will make it, it's too slow and expensive. It will remain as a store of value only and will never be fairly distributed.
XLM has the best chance. The SEC declared it a non-security up there with BTC and ETH because it's decentralized. They are giving it away for free, unlike EOS or most other coins. It is meant for micro transactions, day to day, unlike XRP. It's fast, cheap and there are enough held in reserve to keep the price a reasonable level. Because of this, people will use it. Also, the rich and powerful could adopt it because they can simply buy it for cheap; there is XRP in reserve and the price is reasonable.
Jed McCaleb, already a rich man saw this and created Stellar.
For traders who loves profit, gain, and a little gamble, volatility is the best thing that could make someone rich in short time. That is of course given that he knows what he's doing.
Volatility is definitely desirable for those who gain from exploiting it
"Give me control of a nation's money and I care not who writes the laws. - Rothschild. - i am not as eager to give up my control. Gold and silver has held it's value and has been suppressed for decades. I hope we do not go the way of China with a social credit score that can turn off your money if you ever say the wrong thing. Dangerous path to go down. Thanks @krnel
China might be the blueprint for the NWO :/
I've always thought that Banks and corporations and countries could just circumvent the burgeoning cryptoshpere and just create their own blockchain currencies. Venezuela or AppleCoin for example. The middlemen want to stay in the middle. And as all economies are based on trust and perception it's pretty easy to confuse the masses and spread FUD in an effort to gain control.
You have made some good points and I like your last man standing line, of course, the world would be in the midst of chaos and wreckage if that day came. Money might be the least of your worries in that moment.
Yeah, no need for middle man, they always take a cut, like exchanges. Yeah, in a crash of civilization, you want physical. I have gold and silver to help :)
Oh my God
What’s the difference between this and the farce that’s the American dollar? 🤔
Digital farce :P
Lipstick on a pig lol
Only way too make it stable is make it non tradable
Why do banks smell fishy when they say they want to solve things out?
I am not sure what sheila bair implies when she says digital currency. The dollar or any fiat in my bank account is tbh already digital. Are they talking about decentralisation? If yes, then how? Call it $ or fedcoin, it needs backing from the fed or us govt and a dencentralised fedcoin not backed by usgovt means the whole financial system goes for a toss and we have a new crisis to worry about.
And i am assuming they will still control the supply of fedcoin through traditional central bank policies which will still lead to bubbles. The ending of money supply instantly will cause the economy to crash in my opinion, leading to a recession which the govt or fed wont do. And the american economic school of thought has always argued that monetary policy is the best way to fight economic cycles as opposed to fiscal policies. If only people from traditional finance explained their stance in more detail. I wonder whether they even get what bitcoin has achieved or is this a way to stay relevant during times of truly useful financial innovation, as opposed to securitization and derivatives.
Yeah, it seems a bit confusing when you get down to how they plant to work this out. I think it's just a gimmick to force an end on cash by monopolizing the crypto hype, or something... I don't think some get it, they just don't want to lose control lol