Digital dollars: Will the U.S. create its virtual currency?

Countries worldwide are starting to experiment with creating and designing their digital currencies. Like other popular cryptocurrencies available today, such as Bitcoin, these virtual currencies would also exist virtually. But unlike current digital currencies, they would become created and managed under the power of a country’s central bank. It means that they would represent an official legal tender.

Last year the Bahamas was the first to establish a CBDC – central bank digital currency. For now, around 82 countries representing almost 89 percent of the world economy have been seeking to produce their own CBDC. Several countries such as Sweden, China, South Korea, and Japan have started trials by creating a limited supply of their own CBDC. The Central Bank of Europe and the Bank of England also prepare their own digital currencies.

The United States also considered creating its own digital currency but faces more issues than numerous nations. Earlier this year, Jerome Powell, Federal Reserve Chairman, said that they prioritized creating and testing digital dollars. However, last month, he indicated that the process of creating digital dollars would take time. Moreover, he emphasized that it was better to do everything right instead of fast.

Why debate?

According to advocates responsible for creating digital dollars, the new currency would come with all the advantages of crypto without any other disadvantages. In theory, private banks should not become involved in CBDC transitions. It means that access challenges, fees, and processing delays could all be excluded. Janet Yellen, Treasury Secretary, said that in her opinion, it could result in safer, faster, and cheaper payments. Supporters of digital dollars say that it would enable the government to influence financial policy, easily track fraud, and prevent volatile cryptos from ruining the economy.