Inevitable That Central Banks Will Start Issuing Digital Currency: Fed’s Harker
A digital central bank currency could be in the works after the implementation of the new FedNow real-time payments system.
America’s own digital central bank currency is all but ‘inevitable,’ said Patrick Harker, Philadelphia Fed Reserve president.
Harker was speaking at a community banking conference in St. Louis.
“It is inevitable … I think it is better for us to start getting our hands around it.” He said.
That’s a powerful plug for digital currencies such as bitcoin, and the proposed Libra stablecoin from Facebook.
A digital central bank currency: Fed should learn from others’ experience
Harker did play a cautious tune around his prediction, however. He warned that the Fed should be extra careful, given that the US dollar is the global reserve currency.
“Frankly, I don’t think we should be the first mover as a nation to do this,” Harker said.
His words run counter to those of Bank of England governor Mark Carney. In August, Carney challenged the dollar’s reserve currency status, saying a global digital alternative could replace it. A digital currency “could dampen the domineering influence of the US dollar on global trade,” Carney said in a speech at the gathering of central bankers from around the world in Jackson Hole, Wyoming.
A digital central bank currency from China
Could China take the lead and upstage the dollar? It’s already taking steps to promote a digital yuan.
The Chinese central bank, The People’s Bank of China, is on the verge of launching its own digital coin. Interestingly, China will allow the country’s banks to act as conversion agents between the digital and paper currencies.
The Chinese move could also be prompted by the massive financial muscle acquired by Chinese payment fintechs such as AliPay and WeChat. The central bank wants the country’s banks to get their deposit mojo back.
But it’s an open secret that China resents the US dollar as a reserve currency. Could the digital yuan currency upstage the dollar too?
In that case, China would kill two birds with one stone.
Central banks wary of Facebook’s Libra
Facebook and the Libra Association have been pushing for the adoption of the Libra digital currency. But the proposed currency has received a frosty reception from the governments of France and Germany, not to mention doubts and fears expressed in Washington.
Meanwhile, the Libra Association is showing cracks in its solidarity with PayPal backing out.
So it seems a while before a global digital currency could emerge any time soon.
[Related story: PayPal is AWOL at Libra Association Meeting on Digital Assets]
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