Topline

As institutional interest in cryptocurrencies grows following bitcoin’s blistering rally at the beginning of the year, Federal Reserve Chair Jerome Powell said the central bank is looking closely at the prospect of issuing a “digital dollar.”

Key Facts

Digital central bank currencies are forms of money issued by a country’s central bank that exist entirely electronically, without any connection to physical bank notes or coins. 

They’re different from decentralized cryptocurrencies like bitcoin, which aren’t controlled by one central player, though some of the underlying technology is the same. 

Treasury Secretary Janet Yellen expressed that same view on Monday: “Too many Americans don’t have access to easy payments systems and banking accounts, and I think this is something that a digital dollar, a central bank digital currency, could help with,” she said. 

Yellen also suggested that a digital central currency could help make payments faster, safer and cheaper (that’s because proponents of the technology say it will help simplify complicated, often days-long settlement processes).

Powell said Tuesday that since the U.S. dollar serves as the world’s reserve currency, it’s more important to get the project right than it is for the United States central bank to be first to unveil a digital version of its currency.  

Crucial Quote

“We are looking carefully, very carefully, at the question of whether we should issue a digital dollar,” Powell said Tuesday.

Tangent

China is testing its own version of a digital yuan, and earlier this month distributed 10 million yuan (about $1.5 million) as part of a major test for the project, CNBC reported.

Key Background

Bitcoin has soared to record highs this year as major corporations like BlackRock, BNY Mellon, and Tesla have announced new moves into cryptocurrencies. Not everyone is bullish on the most popular cryptocurrency, which is incredibly volatile and prone to wild price swings. Earlier this year, Bank of America called bitcoin’s rapid rise the “mother of all bubbles.” Bitcoin prices plunged 7% over the weekend after Tesla CEO  Elon Musk, a constant proponent of the technology on social media, said prices were “a little high.”

Further Reading

$8.7 Trillion Asset Manager BlackRock Is Exploring Bitcoin As Institutions Flood Crypto (Forbes)

Tesla Has Plunged 25% And Lost $200 Billion In Market Value Since Its Bitcoin Investment (Forbes)

Not Just Tesla: Big Institutions Keep Piling Into Bitcoin As Price Rockets Past $50,000 (Forbes)

Bitcoin Soars To New High After Tesla Says It Invested $1.5 Billion (Forbes)



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