After Congress’s public thrashing of Facebook’s Libra project and all things crypto, it was only a matter of time before a few Congressmen would bandy together to propose a “news catching” or “click bait” type of response, as a way to counter to this somewhat overblown threat. In a letter to Federal Reserve Chairman Jerome Powell, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) detail their concerns about how an independent company or country could weaken the Almighty Dollar by some type of crypto chicanery.
According to reporting by Coindesk, the letter reads:
The Federal Reserve, as the central bank of the United States, has the ability and the natural role to develop a national digital currency. We are concerned that the primacy of the U.S. Dollar could be in long-term jeopardy from wide adoption of digital fiat currencies. Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency.
There have been others in government in the past that have made similar suggestions for the Fed’s consideration, but it is unclear if the group has ever even performed a preliminary fact finding mission to assure everyone concerned that some kind of contingency planning had actually been undertaken. There have also been entreaties from the International Monetary Fund to delve into these studies, primarily to assist developing economies in helping the impoverished become part of the economic eco-system. The World Economic Forum has also issued updates on work in this area, too.
There seem to be two completely different agendas at work in this space. Aside from the IMF banner waving for the downtrodden, many nations around the globe would like to remove their dependence on the U.S. Dollar for trade and other matters by substituting some type of basket-driven digital alternative. Coindesk noted that:
Indeed, there have been some calls for the global financial system to move away from the dollar. Most notably, Bank of England governor Mark Carney suggested that a digital currency backed by a basket of other financial instruments might help nations make this shift.
The folks over at Cointelegraph previously sought out a response to this digital currency substitution idea, as a way to blunt the Dollar’s global impact. Simon Potter, a former Federal Reserve official, offered these comments:
I see no argument that makes sense to have something that complicated out there when you have large, liquid capital markets in the U.S. Not having one currency that you can basically price things and have a deep market in, that makes life much harder for the global economy.
The two U.S. Congressmen, however, are certain that time is of the essence:
With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a U.S. dollar digital currency.
Is everyone missing the obvious point? Hill and Foster note that cryptos are currently speculative instruments. Yes, that statement may be true, but the notion of Bitcoin, as well as for a few other altcoins, is that it represents a long-term “hedge” to protect against the continuing dilution of fiat currencies by central banks. As debts continue to rise and interest rates drop, the value of fiats will decline, creating more demand for digital alternatives that don’t have “printing presses” manipulated by central bankers.