Former Commodity Futures Trading Commission Chairman Christopher Giancarlo says the pandemic has prompted lawmakers focused on equity and access to look more closely at a Fed-backed digital currency. After leaving the commission last year, Giancarlo launched the Digital Dollar Project, a think tank to push for a U.S. central bank digital currency.
A Fed-backed digital currency is needed to modernize the decaying financial market infrastructure in the U.S. laid bare by the pandemic, Giancarlo told CQ Roll Call. Connecting the unbanked to the payments and financial system would be a side benefit of the plan.
Key distinctions
Both Fed Accounts and the central bank digital currency proposal claim the moniker “digital dollar,” and either one would allow for faster, digital payments. However, while Fed Accounts seek to lower cost and expand access to bank accounts, a Fed-backed digital currency would allow consumers to bypass the account-based payment system entirely, similar to physical cash.
When a shopper uses a debit card to pay for a purchase, it triggers a series of messages from the customer to her bank, from her bank to the retailer’s bank, and from that bank to the retailer. The same would be true under Fed Accounts, though if both the customer and the retailer had Fed Accounts, the Fed would be able to adjust its ledgers directly, eliminating the need for messages to travel between banks.
A central bank digital currency would bypass bank accounts and the messaging system entirely by adapting digital ledger technology pioneered by cryptocurrencies such as bitcoin. A U.S. digital currency would behave more like cash, which changes hands without involving third parties.
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June 23, 2020 at 06:01PM
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Delayed COVID-19 aid spurs search for faster payments - Roll Call
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