US Fed “unlikely” to develop digital currency
The United States Federal Reserve “contemplated” introducing and issuing its own digital dollars.
While a number of countries and central banks are considering the implications of creating and issuing official cryptocurrencies, the United States Federal Reserve is “unlikely” to introduce its own digital currency, according to statements from the head of the US Treasury Department.
Earlier today at The Economic Club in Washington, DC, Secretary of the US Department of the Treasury Steven Mnuchin discussed the scope and potential of cryptocurrency with Economic Club president David Rubenstein.
Mnuchin said the US was “very focused” on examining cryptocurrencies and that at the last Financial Stability Oversight Council (FSOC) meeting he chaired, a working group was established with all financial regulators.
“We want to make sure that bad people cannot use these currencies to do bad things,” he said.
“There are central banks that are thinking of, instead of issuing cash, issuing a digital currency.”
“The Fed has contemplated and looked at… and I don’t think they have any intention of doing this in the near term… you could issue digital dollars.”
The Treasury secretary also alluded to establishing additional regulatory measures for cryptocurrencies.
“In the United States, and people may not realize this, under our laws if you have a wallet to own bitcoins, that company has the same obligation as a bank to know your customer,” Mnuchin said.
“We have rules for money laundering, for all different types of things, we can track those activities. The rest of the world doesn’t have that. One of the things we will be working very closely with the G20 on is making sure that this doesn’t become the Swiss numbered bank accounts.”
Rubenstein also questioned whether Mnuchin was worried about the possibility of Russia creating its own cryptocurrency to avoid imposed economic sanctions, including the freezing of assets and bans on US exports.
“Not at all… No, I don’t think it’s a concern,” Mnuchin said.
Check out Mnuchin’s interview, which will begin with his comments on cryptocurrency, in the video below.
In a speech delivered at a Yale roundtable event examining the future of finance and capital markets in March last year, Federal Reserve Board of Governors member Jerome Powell asserted that there were policy issues and technical challenges to be analyzed before any central bank considers adopting a digital currency.
“We should have serious reservations about our ability to keep a generally circulating digital currency safe and secure. A digital currency issued by a central bank would be a global target for cyber attacks, counterfeiting, and cyber theft. The threats could significantly exceed historical experience with paper currency,” Powell said.
Powell suggested digital currency would also be a target for global criminal activities, including money laundering. Central banks could face trade-offs between strengthening security and enabling illegal activity.
Privacy issues were another concern raised in Powell’s speech. Central banks may need to maintain records of digital currency issuance and individual transactions for authenticity purposes and to combat cyber risks just as commercial banks do. However, he stressed that this may generate privacy concerns and limit public appeal.
“Any central bank actively considering issuing its own digital currency would need to carefully consider the full range of the payments system and other policy issues… as well as the potential societal benefits,” he said.