Bitcoin might soon face its most potent nemesis to date if the digital U.S. dollar pilot project of the Federal Reserve Bank of New York is anything to go by.
To wit, the N.Y. Federal Reserve’s Innovation Center (NYIC) has now launched a 12-week pilot project along with major banks to examine the viability of a digital U.S. dollar. The participating banks include BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, T.D. Bank, Truist, U.S. Bank, and Wells Fargo. The bank transfer messaging service, Swift, will also be a participant in this project.
On a granular level, the pilot program will allow the NYIC to examine a Regulated Liability Network (RLN) for digital asset transactions, where accounts held across multiple financial institutions are connected via a distributed ledger – that is, a blockchain. The network will allow financial institutions to transfer “digital representations of central bank, commercial bank, and regulated non-bank issuer liabilities, denominated in U.S. dollars.”
Readers should note, however, that the concept of a digital U.S. dollar has received significant pushback even from within the Federal Reserve. For instance, on the 10th of November, at a symposium sponsored by the Harvard National Security Journal in Cambridge, Massachusetts, Federal Reserve Governor Christopher Waller expressed his skepticism toward this concept, noting that he remained “highly skeptical of whether there is a compelling need for the Fed to create a digital currency.”
Waller then went on to state:
“The underlying reasons for why the dollar is the dominant currency have little to do with technology, and I believe the introduction of a CBDC would not affect those underlying reasons.”
Of course, the U.S. is certainly not alone in examining the use cases of a Central Bank Digital Currency (CBDC). China’s digital Yuan (also known as e-CNY) has already been circulating for some time. In fact, back in September, China launched a dedicated e-CNY app on iOS and Android. The super app WeChat has already announced that it will allow the option to use the e-CNY on its platform, creating a major impetus for China’s CBDC. Meanwhile, the E.U. and India are also exploring the use cases of their own CBDCs.
Coming back, proponents argue that a digital U.S. dollar will allow the Federal Reserve a much greater level of precision in enacting its own monetary policy. For instance, if the Fed wants to juice up consumer spending, it can start penalizing the digital U.S. dollars stored in each citizen’s wallet, thereby creating a perverse incentive to spend those dollars. Similarly, the Fed can also provide targeted relief to those most in need by depositing a set balance of the digital U.S. dollar directly within designated wallets. The CBDC’s detractors, however, point to the Orwellian undertones behind this concept, highlighting grave privacy and financial autonomy concerns.
Do you think there is a need for a digital U.S. dollar? Let us know your thoughts in the comments section below.
The post Here Comes the Digital U.S. Dollar: The NY Fed Has Now Launched a 12-Week Pilot Program for Digital Dollar Tokens by Rohail Saleem appeared first on Wccftech.
