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June 11, 2018 hypothetical "FedCoin".

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kiy   Monday, 06/11/18 10:50:58 AM
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June 11, 2018 hypothetical "FedCoin".

https://www.coindesk.com/fed-get-serious-crypto-says-former-fdic-chair/
The Federal Reserve should seriously consider its own cryptocurrency, the former head of the U.S. government's deposit insurance corporation wrote in an opinion article last week.

In a piece published Friday by Yahoo Finance, Sheila Bair, the former chair of the US Federal Deposit Insurance Corporation (FDIC), emphasized the pressing need for the Federal Reserve Bank to seriously consider the prospects of a central bank-issued digital currency (CBDC).

She warned:

"If it does not stay ahead of this technology, not only could banking be disrupted — but the Fed itself could also be at risk."

A CBDC, in theory, would not have the same kind of culpability to large fluctuations in value given proper oversight and management by a centralized authority, she said. Beyond this, Bair points out that centralized digital currencies would be "much more effective tools for conducting monetary policy to address economic cycles."

Currently, the status quo allows the government to stimulate and slow economic activity in periods of recession and boom, respectively, through government-sponsored securities sales directed towards domestic banks.

But what if the "FedCoin" – a digital currency issued and backed by the Federal Reserve Bank, was held by all consumers? Then, changes to interest rates encouraging savings and in other times, spending, would be felt by consumers directly rather than through the policy changes of domestic banks.

Bair counters such a perceived benefit to centralized digital currencies by offering a potential downside – credit availability. Consumers wanting to hold all of their wealth in CBDCs would naturally cause credit deficits if parameters are not put in place ensuring banks and other financial businesses remain competitive against a hypothetical "FedCoin".

Bair's comments on the viable use of CBDCs by the central bank are timely as government officials around the world are also chiming into the conversation considering the merits of cryptocurrencies like bitcoin in structure but state-controlled in vision.

June 11, 2018 hypothetical "FedCoin


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