Ex-CFTC Heads Warn of Digital Challengers; Propose A Blockchain Dollar
Could a new-fangled digital currency move the US dollar’s cheese? “Complacency in the face of this threat risks lasting damage to the U.S. economy,” warn the former CFTC officials.
In an op-ed for the Wall Street Journal, J. Christopher Giancarlo and Daniel Gorfine say that recent developments in digital currencies threaten the dollar’s pre-eminent status as a global reserve currency.
That and the circumvention of US sanctions by various foreign entities should serve as a wake-up call to US policy-makers.
A digital blockchain dollar to counter the threat
The authors also write that the US has benefited from the dollar’s worldwide use as a reserve currency. Chief among many advantages was the global demand for U.S. government debt. “A challenger to the U.S. dollar could end the delicate world economic order Americans have long taken for granted.”
Further, the threat could emanate from other central banks such as a digital yuan, a social media platform such as Facebook, or even a commercial venture’s stablecoin.
In fact, Bank of England Governor Mark Carney has demanded the creation of a global digital currency to replace the US dollar.
Meanwhile, the tiny Marshall Islands is already taking steps to launch its own national cryptocurrency.
The authors, therefore, recommend the creation of a digital dollar.
How a digital blockchain dollar would work
They suggest “a government-sanctioned blockchain protocol, created and maintained by an independent nongovernmental group but administered by banks and other trusted payment organizations.” However, in the first instance, a pilot program could be used to transition from physical cash to digital dollars gradually.
“Cash brought into the system would be exchanged for digital U.S. dollars on a blockchain, with the cash lodged in special escrow accounts maintained by the Federal Reserve,” the authors suggest.
Paybacks of the digital blockchain dollar
A digital dollar on a distributed blockchain ledger would improve transaction speeds, provide greater transparency, and lower transaction costs. Moreover, it could also spawn “new economic models based on real-time transactions and micro-payments.”
Because the system would be distributed across various trusted functionaries, it would be secure and not suffer from privacy and antitrust concerns (such as those feared with a Facebook sponsored cryptocurrency).
The greenback would back the new digital currency. Therefore, it would be more stable than any other challenger cryptocurrency. The digital blockchain dollar network could gradually expand internationally.
Mr. Giancarlo is a former chairman of the Commodity Futures Trading Commission. Mr. Gorfine is a former chief innovation officer of the CFTC and an adjunct professor at the Georgetown University Law Center.
[Related Story: Federal Reserve’s Harker: The Fed Will Have a Digital Currency (One Day) ]
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