On June 30th, 2020, the US Senate had a committee to discuss the future of digital dollar. The Us is getting pressure from China after China started testing its own digital currency, the DCEP. DCEP has made strides as it will be embedded in popular financial applications such as WeChat and Alipay.
In future, there will be a high adoption of the digital yuan internationally especially in emerging markets.
The digital dollar idea dates back last year when the currency got hits during the Libra Congress hearings where Facebook officially introduced Libra backed by different currencies and commodities. Even though Libra is built on decentralization, there are users who do not trust Facebook and there are others who are concerned about its threat to the traditional financial system in the long-run.
That fueled Libra to work on its strategy and in December, it proposed a digital-fiat currency being integrated with the strong fiat currencies such as the USD, British Pound, Euros, etc. This will make the current financial system to be more efficient. According to Libra, users will be able to access the digital currencies through apps on their phone including WhatsApp chat and Messenger.
The Covid situation gave the digital dollar momentum as there were distribution issues with the $1200 Covid stimulus checks. There are many people who are eyeing the stimulus.
There is a new stimulus proposal by congress women Rashida Tlaib and Pramila Jayapal, to give $2000 to residents per month through the Automatic Boost to Communities Act (ABC Act). Through the ABS Act, the federal reserve will be able to create Digital dollar accounts or FedAccounts, when authorized by the congress. This will help US residents to access any financial services through a mobile app. This made the Senate Banking Committee to hold a discussion of the digital dollar.
Since the US dollar yearns to be dominating in the financial sector, it has to adopt to a digital dollar so that it can earn place in the global payment system. This is according to Senator Tom Cotton(R-Ark). In the congress, there were also concerns about the regulation of stable-coins. According to Charles Cascarilla from Paxos, stablecoins are not something we can do without, He compared them to antiquated plumbing.
Nakita Cuttino, a professor from Duke University expressed that digital currencies can help to solve the frictions in payday cycle and increasing demand for advanced payment apps.
The former CTFC Chairman, Chris Giancarlo highlighted the many benefits of digital dollar such as increased speeds, lower costs and less issues of financial inclusion.
From the senate hearing, there is hope that the US will be serious on the issue and start working on it. Even though there is a heightened likelihood of competition from China, a solution will be found.
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