A Digital Currency is Being Openly Discussed

I think many people underestimate how quickly a digital currency could become a reality in the US (and possibly Canada). Some of the following stories are a few months old but taken together, they present a strong case that a digital currency could become a reality much more quickly than people are aware of.

The Prediction: A Digital Dollar (Pontentially) in 12-18 months

Sheila Bair, former chairman of the U.S. Federal Deposit Insurance Corp

Transcript:  (June 26, 2020)

I’ve been a big big advocate of digital currency central bank-backed or issued digital currency that actually could be distributed directly to households in times of stress

Give them cash you know don’t give them more debt and find what technology will allow you today to have a transmission mechanism that goes directly into households and obviously congress needs to authorize that there need to be very tight controls around it

but nonetheless in a situation like that we’ve seen how the government and the IRS on the fiscal side has struggled to get EIP funds to households those payments notwithstanding some of the problems and transmitting the payments have done a lot of good for the economy

and so but having some type of automatic stabilizer where cash could actually be distributed through digital wallets which are fairly easy to set up right now right into households that would be so much more efficient than pumping all this money into financial markets and seeing this giant chasm right between you know what’s going on the stock and bond markets and what’s going on with main street

Sheila, the digital currency idea is super interesting because there’s a real concern that the US is behind especially compared with other countries notably china are you concerned about that race to create a digital currency

Well I am I think you know we are privileged to have the world’s global reserve currency I don’t see that changing anytime soon but I do think one of the undercurrents of what china is doing at least especially in developed countries that have unstable currencies is to uh default to the renminbi you know as the currency of choice that they’re using their own countries through their central bank’s digital currency

So yeah I think that’s exactly what’s going on I think we need to wake up to it we shouldn’t be too complacent about our leadership position I think you know or the strength of our system the strength of our fed and its independence and its integrity I think will always give us the edge but we need to effectively use this technology domestically I think it’s insurgently needed but we should also think about how the dollar is used throughout the world.

The other thing nice about digital currency if it’s cryptocurrency if it’s traded on a distributed ledger you have a much better audit trail of transactions so from a law enforcement perspective kind of there’s an urban legend that somehow it’s it makes uh illicit transactions easier actually makes it harder because with the central bank issued or back digital currency you can actually trace the transactions where that that digital money is going through the distributed ledger so from a law enforcement perspective it also has huge advantages

But we do need to be very aware of what’s going on in other countries and the real risk of that is posed to us if we don’t effectively

leverage what you know what is is happening now I mean

I think between in 12 and 18 months we could probably have a system of digital currency if people really put their mind to it and again it needs to be authorized by congress uh but the fed I know has been looking at it for a while and I think we need to accelerate that.

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