The Federal Reserve Issues First Crypto-Dollar White Paper
Last week was a watershed moment for crypto-currency and traditional banking. The Federal Reserve issued its first white paper discussing what a “crypto-dollar” might look like. See “Money and Payments: the U.S. Dollar in the Age of Digital Transformation.”
The Fed describes the policy paper as “the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies.” It is a thought-provoking document.
Imagine if depositors could maintain crypto-dollar ledger accounts directly with the Federal Reserve and thereby avoid the credit risks and transaction costs associated with private commercial banks. Such a system would provide significant advantages to many depositors. But how would such banking impact the stimulative benefit of private banking and the Fed’s ability to control interest rates through the Central Bank’s Federal Open Market Committee? Clearly, the Federal Reserve is starting seriously to grapple with the place of the United State’s Dollar within the brave new world of “crypto-finance.” The paper is available here.