Does the idea of a federally-backed digital currency defeat the purpose of blockchain in the first place? Bitcoin and its virtual cousins were developed in part to drive financial independence among those who lacked stellar credit and appropriate access to banking services. However it could only a matter of time before the U.S. government hones its blockchain tech skills — and it starts work on a cryptocurrency of its own.
Would the Feds Step in?
Given the consistent price jumps amongst top-tier cryptocurrencies, some are claiming that the Federal Reserve Bank is looking to get in on the action, and is inches away from issuing its own digital coin.
One source, for example, pointed towards late 2017, when a top federal official allegedly voiced support for “distributed ledger technologies” (DLT) in the financial arena. This same source also mentioned another regulator that reportedly stated the Federal Reserve was beginning to examine the possibilities behind “offering digital currencies” in the future.
Note when we say “digital currency” here we’re referring to creation of a new DLT, blockchain or consensus-based token that functions similar to the non-government cryptocurrencies that exist today. Simply digitizing dollars on legacy financial networks is more easily accomplished — in fact, only about 10 percent of U.S. dollars exist in physical form anyway, possibly less.
Trouble Around Every Corner
Given the consistent rise in ransomware attacks involving digital coins, it seems like a federally-authorized cryptocurrency — that agencies could easily monitor and control — wouldn’t be far off the mark.
In the case of the recent WannaCry attack, for instance, where attackers were demanding bitcoin in exchange for the release of law enforcement data and computers, a government-backed digital currency could potentially offer federal authorities the ability to fully examine the transactions given the peer-to-peer, distributed technology behind crypto.
Thus, they might have discovered who was behind the attacks and taken necessary action.
Other sources calling for a federally-backed digital currency stated many other reasons for the move as well, such as a dying interest in cash, the security of digital transactions, and crypto’s potential for stimulating weak economies.
Mnuchin: We Already Have Laws to Track Bitcoin
But despite a few positives, there are many arguments opposing a federally-backed digital currency. U.S. Treasury Secretary Steven Mnuchin has been placed in charge of a special branch of the Federal Reserve designed for cryptocurrency study.
He said there’s no present need for a federal digital coin, as U.S. laws are already adapting to allow for the “tracking of bitcoin and cryptocurrency activities.”
“We’re very focused on cybercurrencies,” he mentioned at a financial event in Washington D.C.
He stated that his group, for the time being, is more concerned about how cryptocurrency is being used to hurt others and break laws rather than studying the benefits of issuing separate coins.
“We want to make sure that bad people cannot use these currencies to do bad things.”
More to Come?
For now, the sentiment regarding a federally-issued digital coin appears split down the middle, with some for it and some against it. There are positives and negatives to the situation, and it’s certainly plausible to think we’ll see more of this discussion in the coming yearsHmm.
Will the U.S. soon begin issuing a digital currency? Post your comments below.
Images via Pixabay