The Federal Reserve Is Unconvinced About A National Cryptocurrency

During Singapore Fintech Festival, Christine Lagarde, director at IMF mentions numerous advantages CBDCs offer.

Back in November during the Singapore Fintech Festival, Christine Lagarde, director at the IMF (International Monetary Fund) seems to vouch for CBDCs (Central bank digital currencies). Moreover, she mentions numerous advantages CBDCs offer including financial inclusion, privacy, and security.

During the discussion, she opens the fact that cryptocurrencies- Bitcoin to be the currency of a new cashless world. Looking at the explosive rise of Bitcoin since 2017 and development throughout 2018; the scenario clears that digital currency is here to stay.

The trending bitcoin revolution blockchain technology with enhancing usage as a currency grasps the interest of Kevin Warsh. Warsh is the US Federal Reserve’s former governor and a Fed Chairman candidate. He told the New York Times if he were still Chairman, he might explore blockchain national cryptocurrency familiar as Fedcoin.

Moreover, members belonging to the Federal Reserve have a different perspective regarding the cryptocurrency enthusiasm. On the other hand, Fed researchers are still unsatisfied with cryptocurrencies as well as a national cryptocurrency.

Not only this, the Fed researches including Fabian Schar and Aleksander Berentsen believe that central banks can easily develop their own crypto. However, they further state:

The key characteristics of cryptocurrencies are a red flag for central banks. That is, no reputable central bank would have an incentive to issue an anonymous virtual currency. The reputational risk would simply be too high

They feel that maintaining strict KYC and AML regulations are essential in order to secure from terrorists, drug cartels, and various illegal entities performing abuse. Also, while incorporating these rules it will require oversight from commercial/retail banks to practice it.

Both the Fed researchers note that centralization will be essential in a central bank cryptocurrency. Therefore, it is not only a cryptocurrency, however, rather an e-money. It will be misleading to announce CBDC a cryptocurrency:

Once we remove the decentralized nature of a cryptocurrency, not much is left of it. Virtual money that is centralized and issued monopolistically by a central bank is electronic central bank money. It is worthwhile to mention that electronic central bank money could have been offered a long time ago.

The technology used to issue digital money via centralizing way was in action long time before the blockchain invention. Moreover, Fed researchers don’t feel the necessity of issuance of a national cryptocurrency or electronic money. They might have been ongoing at the times when Satoshi announces bitcoin with another cryptocurrency. It is cryptocurrencies decentralizing functionality that makes them desirable and unique from others.

What are your thoughts on National Cryptocurrency? Share your thoughts in our comments section.

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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