As highlighted in recent utterances by Federal Reserve Vice Chairman, Michael Barr, the U.S. is still far from making any decision on a central bank digital currency (CBDC). Despite the global interest and apparent rush to harness the potential of digital currencies, Barr pointed out that the Federal Reserve is still in its “basic research” phase.
Quite rightly so, investigation and research often constitute the first steps to initiating mammoth projects such as the development of a national digital currency, and these should be different from the actual decision-making. Truthfully, the leap from point A of research to point B of execution is a long and intricate one. It’s the underlying ‘system architecture’ and tokenization models that they’re still perusing.
Interestingly, even when the research is said to be completed, the Federal Reserve won’t be making any hasty move without proper backing from the executive and legislative bodies. This is where the predicament lies; convincing a divided Congress. The ideation of a digital dollar has already faced critique from Republican lawmakers, indicating the rocky path to legalization.
Moreover, there’s a pressing need for Congress to get on board and provide a structured approach to stablecoins – the crypto sector’s tokens linked to steady assets such as the dollar, as highlighted by Barr.
Without strong federal oversight, an unchecked proliferation of stablecoins could pose severe risks to financial stability, monetary policy, and the U.S. payments system. This brings to light the importance of establishing a competent legislative and regulatory framework before the risks connected to the widespread use of non-federally regulated stablecoins come to the fore.
Meanwhile, the recent launch of FedNow, the Fed’s real-time payments network, has ignited a discussion among supporters, with some suggesting it could compete with the features offered by stablecoins. Barr acknowledges that the program’s use is currently limited. Still, he holds a strong belief that the participation in FedNow will swell over time.
In conclusion, while the concept of a U.S national digital currency is still far from being definitive, the journey to its possible actualization remains intriguing. However, important questions about regulatory oversight, monetary policy, and financial stability, suggests there’s still much to be done.
Source: Coindesk
