The Result Of A US Digital Dollar’?|Biden Admin moves to implement digital sawbuck

Key Crypto Insights

US The US president Joe Biden has ordered the federal government to consider creating a digital dollar, this could be a step to change how money is used and moved all over the world.

Before his decision is a virtual greenback will be many major consequences as well as risks- to consider first.

Key Crypto Insights

It will still be an official dollar from the US Federal Reserve central bank, as are all US coins and bills used currently, but in a digital form that is available to anyone as well as financial institutions.

Unlike money deposited in an account at a bank or through apps such as Venmo or Apple Pay, it would be recorded in the accounts belonging to the Federal Reserve, not a bank.

While at the same time it is expected that the digital currency will be as valuable as the paper currency, a divergence from cryptocurrencies which currently have highly volatile valuations.

There are many questions that remain unanswered such as whether a digital currency is based on blockchain technology , like bitcoin, or if it will be tied to some kind of payment card.

Biden is asking various agencies like those at the Treasury Department, to examine diverse issues regarding the topic.

If the government chooses to pursue the idea then it could take "a number of years" before we can utilize digital currencies -- authorities will have to research whether they can use the technology that they utilize, said Darrell Duffie, a digital currencies specialist at Stanford University in California.

It would reduce or even eliminate transaction fees since transactions would no longer pass through banks as well as bank cards or apps that earn commissions from every transaction.

They say it could help those who do not have bank accounts approximately five percentage of all households within the United States, and could help the government to provide benefits.

There are dangers like a security breach or a system failure There are also questions about privacy, as the government could theoretically gain access to any transaction.

The banking system could also be damaged as banks depend on deposits from customers to loan to other banks, and by using a digital currency they might have less cash at their disposal.

A US 'digital dollar' could have far reaching consequences on the world financial system Photo: AFP / Asif HASSAN

International transfersare usually expensive and time-consuming to create they can be significantly facilitated.

An operation that currently takes two days for to be had me going verified could be done in one hour, said Marc Chandler, a foreign exchange expert with the broker Bannockburn.

For Chandler the geopolitical significance in the US dollar will not be disrupted by the digital dollar's debut.

A digital currency would be "a natural evolution rather than a revolution" the analyst stated, noting there are more than $6.5 trillion is exchanged electronically every day in the exchange market for foreign currency.

Even regardless of whether China launches a large-scale digital currency like the one that is being discussed, he said the country doesn't believe that it will alter China's role in the world economy, as "there will always be questions of trust, transparency, depth of markets."

For Stanford's Duffie But, if the United States wants to continue to reap the benefits of the dollar's status of being the most used currency in central bank reserves as well as international payments, it's vital that the government takes its steps prudently.

"The US are going to need to ensure that they stay in a leading position in international forums that discuss standards for making cross-border payments standards for digital currencies," he said.

Some countries are already creating digital versions of their currencies, ranging from the eurozone to India however "there is no evidence to suggest being first to market provides any significant or material advantages," said Jamiel Sheikh, founder of CBDC Think Tank.

But, failure due to unintended consequences poor usage, or other reasons can affect faith in the institution that issuing it as he explained.

"The overwhelming dominance of the dollar gives the US the luxury of learning from... other countries," agreed Cornell University professor Eswar Prasad.

If designed properly the digital dollar can be more suitable for use domestically rather than a cryptocurrency Duffie.

For international transfers, however Mr. Smith said that he was "skeptical that large central banks like the Fed or the ECB, China or Japan, will give accounts at the central bank to people all over the world."

Should the United States did so, according to him, it could damage the monetary system in small countries whose people might prefer to use the digital dollar rather than the local currency.