With Facebook’s proposed cryptocurrency on the horizon and China stepping up plans to launch a digital version of its fiat currency, two US lawmakers have asked the Federal Reserve to consider the creation of a digital dollar.
Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) shared their thoughts in a letter they sent to Federal Reserve Chairman, Jerome Powell, highlighting how the dollar’s dominance could end with the advent of national digital currencies around the world.
First, the lawmakers identified that the U.S Federal Reserve, as the country’s central bank has the ability and fundamental role to “develop a national digital currency,” and then expressed concern regarding how “the primacy of the U.S. Dollar could be in long-term jeopardy from the wide adoption of digital fiat currencies.”
They cited a recent study from the Bank for International Settlements (BIS) which revealed that roughly 40 countries are already exploring the concept of digital currencies, and also mentioned efforts by private companies such as JP Morgan, Wells Fargo and more remarkably Facebook working on a similar project.
Regarding Facebook’s proposed Libra, the Congressmen wrote,
“The Facebook/Libra proposal, if implemented, could remove important aspects of financial governance outside of U.S. jurisdiction.”
Then, the lawmakers posed several questions to the U.S Federal Reserve including whether the central bank was also evaluating the possible creation of a national digital currency, and whether there are plans in place for the bank to roll out such a currency if the emerging concept eventually takes off.
Also noteworthy is that Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) even suggested that the U.S Federal Reserve should place the creation of a national digital currency among its short term priorities.
“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 U.S. dollar digital currency,” the Congressmen wrote in the letter.
With Bank of England Governor Mark Carney recently calling for the creation of a global digital currency as a way to end the Dollar's position as the global reserve currency, the current letter sent to the Fed by the U.S Congressmen may rightly be considered a wakeup call.
The big question though is whether the central bank will take action or risk falling further behind their global counterparts in a race they appear to be losing already.