Cryptocurrency enthusiasts were not surprised to find out various central banks and governments want to issue their own digital currency in the future. In the United States, this initiative is known as Fedcoin. The idea was first proposed in 2014 by JP Koning. Fedcoin will not necessarily be a threat to bitcoin anytime soon, yet it is worth looking at what this project entails exactly.
Fedcoin Could Have Its Merits In The Long Run
It has become evident our society will transition to digital payments sooner or later. Whether that means there will be mass adoption of bitcoin and other cryptocurrencies, remains to be seen. Central bankers also want a piece of the market, which is why various countries aim to introduce national digital currencies. Fedcoin is one of those currencies, and it gained notable support from day one.
To be more specific, the introduction of Fedcoin is overseen by the Federal Reserve, IMF, and the World bank. It is quite interesting to see all of these major financial institutions show such an interest in Fedcoin and what it might mean for the US economy. Central bankers will not give up control over a country’s financial means any time soon, and Fedcoin would allow the banks to control the digital economy as well.
One of the bigger questions that arise is why US consumers would use Fedcoin in the first place. This national digital currency is not designed to replace the US Dollar anytime soon. In fact, both types of currency will complement one another. Running a parallel currency is quite interesting, yet it also makes Fedcoin less appealing to most consumers and businesses. There is no real incentive to use Fedcoin over the US Dollar, as they both have the same value (or lack thereof).
Using the blockchain for payments and settlements makes a lot of sense for central banks. Not only will this speed up transactions, but also reduce overhead costs for all parties involved. This is why the concept of Fedcoin was introduced during a 2016 meeting, which was also attended by several companies providing blockchain services. One could argue the US central banks could use the Ripple network to the same effect, yet it appears they feel Fedcoin is a better option as it puts them in full control of the digital money ecosystem.
Pegging one Fedcoin to the value of 1 US Dollar is quite an intriguing concept. Some cryptocurrencies, such as Tether USD, are trying to achieve the same goal, however this currencies have been facing some challenges with the banks. Fedcoin will not target cryptocurrency users by any means either, as it is a new currency designed to be used by all US citizens and companies. Moreover, this digital currency can serve as a way to control foreign exchange rates.
In the end, it is not hard to see why governments are so keen on issuing national digital currencies. Projects such as Fedcoin would provide more centralization and control to central banks. Then again, its usefulness remains to be determined, since the currency will – most likely – run in parallel with the US Dollar. It would allow the US to push toward a cashless society in due time, though, which makes Fedcoin both a blessing and a curse at the same time. It will be interesting to see what comes of this project, as nothing has been set in stone just yet.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.