Congress Taking a Serious Look at a Digital DollarRyan Tucker
One of the big questions in the cryptocurrency world is how soon governments will create their own cryptocurrencies, digitizing their fiat currencies, or whether they will embrace cryptocurrencies at all. While some countries such as Venezuela have created their own cryptocurrencies for specific purposes such as evading sanctions, and China is reportedly still in the midst of developing its own cryptocurrency, large nations and currency blocs such as the US, UK, Japan, and the Eurozone still are hesitant to embrace digital currencies. But that might be changing.
The US Congress recently passed a $2 trillion stimulus bill to attempt to support the US economy as a result of coronavirus-related economic shutdowns. Earlier proposals for the stimulus contained provisions to create a “digital dollar” to allow the unbanked to benefit from federal government stimulus proposals. The proposed legislation imagined the Federal Reserve creating digital wallets for individuals and disbursing stimulus payments to those wallets.
While the proposal is interesting, the Fed isn’t set up to be a retail bank catering to consumers. And even if the wallets were to be held at a commercial bank, the Fed would still maintain those accounts, something that is outside its purview. Still, the fact that many people in Congress encouraged the concept of a digital dollar means that the concept of a US government cryptocurrency isn’t as far-fetched as it might have been even five years ago.
Still, whatever advantages a US government cryptocurrency might have for the US government, it will still pale in comparison to the advantages posed by Bitcoin, Ethereum, and other decentralized cryptocurrencies. The dangers of centralization and unlimited money creation posed by fiat paper currencies such as the US dollar would remain with a US government cryptocurrency, and would offer no advantages in that respect versus Bitcoin and other cryptocurrencies. So cryptocurrency investors who understand the value proposition of cryptocurrencies probably don’t need to fear that government cryptocurrencies will take the world by storm anytime soon and erode the value of their investments.