May 11th marked the day when the CEO of Coinbase, Brian Armstrong, the chairperson of the Federal Reserve, Jerome Powell, and the former House Speaker Paul Ryan met for discussions on how China’s central bank digital currency posed a long term threat to the status of the United States’ reserve currency.
An Important Conversation – On Many Levels
The gathering was an in-person meeting initiated and secured by the Coinbase CEO to establish relationships and provide solutions concerning crypto. The meeting was also targeted at helping the United States achieve better regulatory clarity in the crypto space because they were a big part of the crypto council.
The meeting between the CEO, lawmakers, and heads of federal agencies took place just days before the white paper examination announcement by the chief of the Central Bank, which would determine whether the Federal Reserve should develop its own digital currency.
According to Jerome Powell, the Federal Reserve would be releasing a discussion paper to outline the department’s current position on matters of digital payments, specifically attention to the associated advantages and disadvantages. It concerns the establishment of a central bank digital currency.
Scepticism by the US in Embracing a CBDC
The meeting between Armstrong, Jerome and Ryan follow the reluctance of the US to embrace a central digital currency bank as the Chinese have. Having developed a digital Yuan, China has set the pace for other nations, the United States included.
Central bank digital currencies are famous for serving as a growing source of interest worldwide, especially with the flourishing of cryptocurrencies witnessed in the market today.
On its part, the Federal Reserve of the United States has taken a more calculated approach to this development, maintaining her reluctance to dash into the challenging record China has set before them. The pacesetting position by the Chinese in the digital currency arena turns an even bigger spotlight on the projects of the United States. The US has not displayed any reactive efforts and does not plan to any time soon.
Growing Concerns Around China
Nonetheless, the Chinese have entered a rather unique and sparsely populated realm by developing the central bank digital currency. With this step, China ushers their already electronic prowess to a mainstream place to serve as a mode of payment.
As such, the government would monitor and evaluate its citizens’ spending habits actively and, therefore, leverage their country to the world.
China’s central bank digital currency shift is worrying to the United States Federal Reserve because of how the Chinese Yuan threatens the United States Dollar. Previously, the US dollar would enjoy status and pride for being the world’s reserve currency and a means for facilitating most international commerce.
Nonetheless, officials at the Federal Reserve have been treading ever so carefully since this issue started, tiptoeing into the digital currency arena. Despite the heatwave coming from China, they have not shown any signs to relent.
Concerns over US Dollar
Meanwhile, Coinbase CEO Brian Armstrong expressed his concerns regarding China’s CBDC. He made it clear that he believed the development posed a significant and long-term threat to the United States reserve currency status, mainly if the United States failed to act accordingly and create their own central bank digital currency.
The Federal Reserve chair came forward to express the Feds intention to proceed with the preparations on implementing their own CBDC. The only challenge is that this was a proclamation to commence with research and not the actual development.
According to Powell, it is better to take the time to do things the right way instead of folding under pressure only to make irrevocable mistakes.
It is clear now more than ever that policymakers are increasing their efforts to explore the potentiality of digital currency. For instance, the Boston Federal Reserve is seen carrying out progressive research projects about the technology that could serve to develop a central bank digital currency.
With policymakers diving into the benefits and threats associated with a central bank digital currency, Powell, together with like-minded officials, have come forward to articulate why they are unable to move forward in an official capacity until congress acts.