On 18th July 2018, the US congressional subcommittee on Monetary Policy and Trade held a discussion aimed at addressing some of the major questions currently facing digital currencies. The hearing that was aptly named “The Future of Money: A Look at Digital Currencies” looked at all the implications that would come with implementing cryptocurrencies in the domestic and international markets.
What Happened At The Crypto Hearing
During the hearing, the members discussed the numerous ways in which cryptocurrencies were being deployed, as well as the technology that was being used to support their implementation. They also looked at blockchain as a platform and the role played by central banks.
The major argument during the entire hearing revolved on the issue of whether central banks should consider introducing a CBDC (Central Bank Digital Currency). Rodney Garrat, an economics professor working at the University of California, later on, addressed this particular point.
In the address, the economics professor noted that central banks have to be left to make a decision on whether they would be willing and open to the idea of completely withdrawing from providing the general public with payment devices or whether they would prefer to adopt one particular type of digital alternative. This would, in turn, be seen as a kind of cryptocurrency.
Alex Pollock, who happens to be one of the senior-most senior fellows at the R Street Institute also had something to say. According to him, having a central bank digital currency can be equated to coming up with one of the worst financial ideas ever put forward, although it would still be conceivable to do so.
According to Pollock, introducing this kind of currency would only help in increasing the power, role, and the size of the banking institutions. He went on to add that if the federal reserve adopted a CDBC, the result would be that the CDBC would end up becoming the credit allocator of the US financial and economic system.
In addition, this would mean that credit allocation would now become extremely politicized, with the general population becoming liable for any losses made. This would mean that all the risks would directly be apportioned to the central bank.
Pollock also went on to explain that if fiat money was to become digitized, its nature would not change in any way, and it would still continue being issued by the central banks. Although Pollock was able to visualize a digital currency that was in a way backed by the use of assets, his conclusion was that fiat currency will not be private like bitcoin is. In his view, scrip and cryptocurrencies are very similar.
Roger Williams, the chairman of the subcommittee is on record making inquiries on what the impediments are when it comes to adopting blockchain and cryptocurrencies, and what the United States Congress would be able to do about it. Nobert Michael pointed out that CGT (capital gains tax) is currently the most significant impediment as it is not easy to track losses and gains.