In a letter sent to Federal Reserve Chairman Jerome Powell, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.), both members of the House Financial Services Committee, outline why they think the Fed should be developing a national digital currency for the US.
Pondering the implications of the US House Financial Services Committee's hearings on Libra, the congressmen write:
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.
The letter refers to the digital currency developments by Facebook, J.P. Morgan and Wells Fargo, and reiterates the committee's concerns about digital currencies potentially leading to a loss of government control over monetary policy.
A series of questions were put to the Fed to answer concerning the development of a US digital currency:
Is the Federal Reserve exploring the development, or actively developing, a US dollar digital currency?
What plans are the Federal Reserve making to respond if digital fiat currencies or their private sector equivalents being to gain traction?
What legal, regulatory or national security issues would prevent the Federal Reserve's development of a US dollar digital currency?
What benefits or detriments do you see the Federal Reserve incurring as a result of developing a US dollar digital currency, especially as it relates to upholding its mandate and policy goals?
What market risks, if any, do you see in the development, or in the failure to develop, a national digital currency?
Please provide a description of any salient design features that would have to be considered or specified by Congress for the development of a US dollar digital currency, (e.g., access and transfer mechanisms for such currency, the degree of anonymity of transactions vis-a-vis the central bank, parameters of a potential pilot program, and any cyber or other operational considerations).
The likelihood of the Reserve Bank of Australia being encouraged to also consider the case for an Australian digital currency is unclear. After all, in June 2019 the RBA:
...it is difficult to envisage cryptocurrencies presenting a compelling proposition that would lead to their widespread use in Australia.
With the Bank for International Settlements (BIS) encouraging central banks to continue to research digital currencies, and BIS Chief Agustin Carstens saying that central banks will likely need to issue digital currencies in the future, the RBA will likely need to reconsider it's innovation strategy around digital currency.
Thanks to Tom Skevington for his assistance with this piece.