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The former Federal Reserve chairman Alan Greenspan said at a conference that it is pointless for central banks to issue their own digital currencies.
Presenting his views, Greenspan said that national (fiat) currencies are backed up by sovereign credit and therefore are far superior to digital assets proposed by tech giants like Facebook. “There’s no point for them to do it,” Alan Greenspan affirmed a financial conference in China.
Describing the importance and potential of national currencies, Greenspan said that because fiat currencies such as the U.S. dollar are backed up by sovereign credit, it is something that no other private organization can offer. “The fundamental sovereign credit of the United States is far in excess of anything Facebook can imagine,” he proclaimed.
The social media giant is, however, in trouble as several previously allied companies have abandoned the crypto project amid of regulatory concerns raised by policymakers across the world. Important payment processor giants like Visa, Mastercard, Stripe and PayPal alongside other tech giants including eBay have left the Libra Association as the project might face further issues with regulatory bodies of the U.S. government.
Several leaders of the European Central Bank just supported the idea of a central bank digital currency, while the People’s Bank of China announced earlier this year that it was working on a digital currency backed by the yuan. However, it is still not clear when it will roll out to the general public.
Philadelphia Federal Reserve bank president Patrick Harker said that “It is ‘inevitable’ that central banks including the U.S. Federal Reserve will start issuing digital currency.” However, he also spoke words of caution that the United States shouldn’t be the first nation to issue such virtual currency. Currently, his views don’t go along with the majority of Fed members but he said he would set up a small research group to counter the issue.
Central Bank-Issued Digital Currency Started with Facebook
Facebook announced its cryptocurrency project Libra several months ago, and it is intended to be launched at some point next year. several congress members including House Financial Services Committee Chair Maxine Waters wrote an open letter to Mark Zuckerberg to halt the development of the project.
France and Germany already declared on the ban of Libra while several leaders from the European Central Bank backed the idea of centrally issued digital currency. There are also rumors that China might introduce its first centrally issued digital currency. Hence, the development of a central bank-issued digital currency is currently trending primarily as a counter-maneuver against Facebook Libra.
Yet, launching a digital currency issued by a central bank might seem as a great idea in theory but it certainly has its own challenges that are needed to overcome.