Former chief of the US Federal Deposit Insurance Corporation (FDIC) could not help but emphasize how the Federal Reserve Bank should have its own cryptocurrency, according to an article published on Yahoo Finance last June 8.
Shiela Bair, FDIC’s former chair, warned the said organization that “if it [Federal Reserve Bank] does not stay ahead of this technology, not only could banking be disrupted, but the Fed itself could also be at risk.”
This is in light of her suggestion for the Federal Reserve to develop its own Central Bank-Issued Digital Currency (CBDC). Theoretically, a CBDC should not have the same sort of culpability to large fluctuations in its value, if given proper oversight and management by a central authority on the subject. Furthermore, central digital currencies could become “much more effective tools for conducting monetary policy to address economic cycles.”
As of the moment, status quo permits the government to influence economic activity in periods of recession or boom via state-sponsored securities sales that are directed toward its domestic banks.
In case of the consumers possessing a Fed-supported cryptocurrency, shifts in interest rates encouraging saving and spending, respectively, could be experienced by the consumers directly instead of being enforced by policy changes of local banks.
(Photo credits: Shiela Bair)