Rob Kaplan, President of the Fed Reserve in Dallas, and a former executive at Goldman Sachs is the latest to come out in support of digital currency. This comes at a time when regulators are keenly looking into how cryptocurrencies like Bitcoin and Libra might disrupt the financial systems.
While speaking at an event in Austin, Rob said that the Fed is yet to decide on whether it would create its own coin but it is something to consider. One of the main reasons for this strategic move would be to protect the dollar from shocks that may hit once digital assets are embraced as optional reserve currencies. The U.S would be at risk of paying higher interest rates on the dollar if other powerful economies create a digital asset that is more embraced as standard payment especially with the evolution in Fin Tech.
These sentiments had earlier been echoed by Christopher Giancarlo, former Commodities and Futures Trading Chair. Giancarlo said that the need for a digital currency ought to be a priority if the U.S is to protect the dollar's value as a reserve currency. Today, most business across the world is carried out based on dollar transactions, making the U.S a superpower in International Trade.
Assuming a digital asset was to take over from the dollar, the U.S economy would suffer greatly. Interest rates on government securities like treasury bonds would go higher than expected. Ultimately, the Fed's dominance across the world would decrease in terms of assets held and so will the bargaining power.
Facebook's Libra is also another topic that's been at the center of FinTech discussions with regulators like Jerome Powell, Fed Chair, noting that their potential to disrupt existing systems. The reaction from U.S lawmakers and authorities like the Bank of England have however been a big hinder to the project launch.
The rise of digital currencies could also limit the effectiveness of sanctions intended by the U.S government. Despite the foreseeable future as the world's reserve currency, the U.S ought not to be comfortable in these times of money evolution as the digital space takes over.