Digital dollar could be one of the biggest projects along with China’s attempt to create digital currency. The Massachusetts Institute of Technology and the Boston Fed have joined forces to develop a US Federal Reserve prototype’s digital currency. The prototype version of the US CBDC could be unveiled in July this year.
When China is already conducting “general tests” for its digital currency for central bank (CBDC), a Bloomberg report has emerged stating that we could see a prototype of the US version of the CBDC in July.
Why is the “digital dollar” actually being created?
Although there is still no official political mandate for the Fed, lawmakers, regulators, and stakeholders, have been talking a lot lately about the need to speed up the process of settling transactions through individual Fed accounts instead of using money from commercial banks such as SWIFT or Fedwire. in the distribution of social and incentive payments through banking.
Proponents of the US CBDC argue that the digital dollar would “make it easier for institutions to have a broader and more diverse approach to making high-value payments.”
The difference between the US and China
In China, where the People’s Bank of China began work on the CBDC (Digital Yuan) project as early as 2014, the CBDC is seen to undermine the dominance of the duopoly AliPay and WeChat Pay. With the rise of mobile payments in the country and the decline in cash payments, there was growing concern about the money bubble of commercial banks locked in Alibaba or Tencent accounts.
Dovey Wan, the founder of the Chinese company Vitive Primitive Ventures, commented:
“Digital RMB is a project that is designed as a means to re-employ monetary control in the interest of financial stability.“
(Note: RMB (Renminbi) is a term for the Chinese physical currency’s digital form. Thanks to blockchain technology, it is distributed by the Chinese central bank to second-tier providers, including state-owned banks and online payment providers such as Alipay and WeChat Pay).
Both the Chinese and American efforts to create a CBDC mean creating a high-level competitor to produce commercial bank money. The People’s Bank of China is concerned that mobile payment companies such as Alipay and WeChat Pay have too much control over the money supply, an opinion shared by other analysts.
In the US, by contrast, banking marketers are vehemently opposed to the idea of introducing CBDC.
According to published information, the American Bankers’ Association (ABA) spent almost $ 3 million on lobbying lawmakers in the fourth quarter of the year. In total, the association spent nearly $ 12 million in lobbyings in 2020.
Ross Feingold, a commercial lawyer, based in Taipei and a former adviser to Deutsche Bank’s Hong Kong branch, is the largest independent group to raise funds from ABA lobbying. In an interview with Blockworks that there is no legal way in the US to force established financial institutions to accept the CBDC as a payment method. Otherwise, it would look like China in the United States, and it would be “culturally disgusting.”
Struggle for power
The American Bankers’ Association claims in one of its documents that the CBDC would give the Fed too much power and that it would be inappropriate for the Fed to become a “national arbiter of social issues” for some controversial purchases of cannabis and firearms.
“People’s right to transaction outside the central bank’s supervision is a valued civil liberty that is protected by the proper process of the private banking sector.”
It should be added here that the ABA’s privacy concerns may be exaggerated, as the US Government already has the tools and legal framework (authority) to monitor any transactions.
“The banking secret act and the extensive authority of the financial crime recovery network are executive tools for bodies to monitor and invest individual transactions.”
Let’s not hurry anywhere with digital dollar
During Monday’s virtual panel at a banking conference, Fed Chairman Jerome Powell reiterated that he would prefer the US not to rush anywhere and consider everything carefully:
“Because we are the world’s main reserve currency, we do not have to hurry with this project, and we do not have to be the first on the market.”
In a statement, Powell said the United States was the “sovereign anchor” of the world’s most trusted currency and asked whether the disruption was safe and whether the United States needed such a system at all.
The year 2021 is referred to by many experts as the year of the CBDC (Central Bank Digital Currencies). However, as recent developments from the USA show, this idea is not met with understanding and enthusiasm. And, as expected, the loudest commercial banks in the US are understandably shouting…