Central banks all over the world are – for the most part – convinced that issuing their own versions of Bitcoin serves no real purpose as of right now. The Federal Reserve, on the other hand, may have different ideas. One of its former officials is still convinced that the concept of FedCoin holds a lot of merit. One can only hope common sense prevails in the long run.
The FedCoin Concept Isn’t Dead
For quite some time now, there have been rumors regarding the Federal Reserve issuing its very own digital currency. Such a concept makes sense on paper, as the central bank doesn’t want competitors such as Bitcoin to succeed without opposition. In the real world, however, a bank-issued digital currency will always be scrutinized first and foremost.
Whereas most people assumed the FedCoin concept had been put on ice indefinitely, that is not necessarily the case. No real development progress has been made, but former Fed governor Kevin Warsh is convinced this currency will come to market. Whether or not it would have a chance of succeeding is a different matter altogether.
In a recent interview, Warsh made it clear that the concept of FedCoin needs to be seriously considered. In his opinion, existing crypto assets are cleverly designed and have tremendous potential. However, they all lack the “fundamental backing” of a government or central bank. That is also what makes such currencies incredibly popular, as a lot of people are fed up with the interference of banks and governments.
According to Warsh, FedCoin would be implemented if he were ever to be reinstated. He stated that a team should be put in place to contemplate the creation and issuance of FedCoin, and that the main reason for creating such a currency would be to “bring legal activities into a digital coin.” However, FedCoin would not replace traditional cash, but be more of a tool to implement a monetary policy during the next financial crisis.
That comment is pretty interesting for many reasons. It confirms that Warsh is a firm believer in monetary policy, which is often considered to have been the catalyst for the 2008 financial crisis. It also shows he worries about a new financial crisis looming on the horizon. Most consumers don’t give such a prospect a second thought, but it is important to keep an eye on the bigger picture at all times.
Central bank digital currencies will bring nothing of value to the table. Since these currencies will not replace cash, it is an extra “avenue” for more helicopter money to be brought into circulation. This is not something the world needs at this stage. It is certainly true that Bitcoin and other currencies are not perfect by any means, though their volatility is both a problem and their strong suit. Contrary to what some people might wish, though, they will not be going away.