US legislators seek clarification on US dollar digital currency

Senior House Financial Services Committee members have written to the Federal Reserve to consider the possibility of introducing a US dollar digital currency, according to the letter dated Sep 30.

A country like the US has been long-known to take an antagonistic stance towards the growth of cryptocurrencies or any other currency that challenges the supremacy of the US dollar. However, with a growing number of countries considering the launch of their own fiat digital currencies, the US lawmakers believe that the US dollar’s primacy is at risk.

Take US dollar digital currency into consideration

According to their letter addressed to Federal Reserve Board Chairman, Jerome Powell, representatives French Hill, and Bill Foster express their concerns on the changing nature of the money. In the letter, they urge the federal reserve and the central bank of the United States to strongly consider developing a US dollar digital currency with a flexible yet robust monetary and financial framework.

As the world keenly awaits China’s highly-anticipated digital currency launch later this year, smaller countries like Sweden and Uruguay have also begun work on e-fiat currencies. That’s not it. Per a study conducted by the Bank for International Settlements, over forty countries are appraising the benefits and implications of state-backed digital currencies, states the letter.

Voicing their apprehensions over causes for American citizens turning to cryptocurrencies, the letter adds it is due mainly to the fact that the country does not have a state-back digital currency. When citizens have recourse to cryptocurrencies as a payment tool or unit of account, they are jeopardizing the entire monetary system as liabilities rest with a private organization. Combating terrorism-funding or efficiently enforcing anti-money laundering measures would be more of private-sector responsibilities and than state’s, it contends.

US lawmakers seeking answers

Thus, in search of more unambiguous answers, the US lawmakers have put forth a set of questions, seeking the government’s viewpoint on digital fiat currency and requesting it to weigh its benefits against the risks positively.

Meanwhile, last week, an ex-Federal Reserve official, Simon Potter, suggested that the US dollar’s dominance is vital for the economic stability of many countries. He alerted the central banks to take heed of the private companies collaborating to form a virtual currency and that it is a matter of grave concern if they come together to uproot the US dollar as the global reserve currency.