According to a recent report on Politico, officials at the Federal Reserve and politicians on Capitol Hill are so concerned about Libra that they are thinking of launching a competing coin. Just a few months ago, such an idea would have been considered outlandish. However, as the launch of Facebook Libra nears, momentum for the idea is growing.
Concern over Creation of a Different Currency
Officials at the federal level are afraid that Facebook Libra will essentially be a new currency system that is outside the control of central banks. However, it is not just Libra. Other nations around the world are considering launching digital currencies, which could challenge the supremacy of the US dollar. Senior officials such as the head of the Bank of England are also considering the idea. He called for the creation of a digital currency that would replace the US dollar as the global reserve currency.
No Official Discussions
At this point, only informal discussions are being held. Lawmakers have written to the Federal Reserve asking them how it could approach such a digital currency. Officials at the central bank have said that one day they might get involved in such a project. According to Reuters, the president of the Federal Reserve Bank of Philadelphia sees a central bank-backed digital currency as inevitable.
Even if Facebook Libra does not launch, there is no way for lawmakers to stop the launch of a similar project in a different country. As a result, it makes sense for the Federal Reserve to launch its digital currency.
Lawmakers have admitted that no one is sure how the digital economy will evolve. However, it is important to start preparing for when it arrives. This latest development is a sign that rapid technological developments are placing pressure on the traditional financial system. It also clearly shows that lawmakers and central bank officials might not be fully prepared to deal with it.
No Clear Details
The Federal Reserve has released very few details about the possible release of a digital currency. However, those who advocate for such a move say that it could allow consumers to make payments without having to go through banks that charge a fee to move money. If it were launched, it is likely the digital currency would be inspired by blockchain technology.
In the past few years, the Federal Reserve has not warmed up to the idea of launching a digital currency. Its board of governors, which is based in Washington, has dismissed such a thing ever happening. However, that was before Facebook revealed its plan to launch a global digital currency. The announcement might have forced them to reconsider their stance on the issue.
Most senior officials such as President Trump, Chairwoman Maxine Waters, and others have been quite concerned about the Libra project. The main reason the project is so concerning is that Facebook has over a billion users globally. As a result, it represents an existential threat to the dominance of the US dollar.
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