After publishing its "discussion paper" last month, the Fed is gathering feedback across the government, private sector, and general public on next steps.
Measure twice, cut once -- that practice makes sense for carpenters crafting a project and it's the approach the Federal Reserve is taking in its hyper-caution policy crafting and evaluating the potential of launching a U.S. digital dollar. Right now, the Fed is in "discovery phase" after issuing its discussion paper last month that laid out the debate for whether the U.S. should deploy its own cryptocurrency as a central bank digital currency (CBDC).
What is a CBDC?
A CBDC is a form of virtual fiat money that runs on a private blockchain with government oversight that complements the official printed and minted currency of that issuing country. CBDCs are generally regulated and issued by a country's central bank or governing monetary agency. It's worth noting that a CBDC is backed by the full faith and credit of its issuing government.
Cryptos are highly politicized so the Fed is taking its time
But launching a U.S. digital dollar is politically dicey, and critics might rightly claim that such a move would be a gross power grab by the Fed governors and Chair -- all of whom are political appointees and not duly elected officials by American voters. Additionally, there's a wide range of opinions among politicians in Washington D.C. on the topic of cryptocurrencies and CBDCs.
Some politicos see blockchain-based money as a technological innovation that can secure U.S. global economic dominance far in the future while simultaneously advancing economic equality to the 1.7 billion unbanked individuals globally. Others claim crypto is the latest way for terrorists and cyber thugs to steal from unsuspecting innocents, laundry criminal cash, and wreak on- and offline havoc. Both political perspectives are right and wrong by measures of degree.
That's precisely why the Fed is taking a measured approach to CBDCs. Consider that the day after the Fed posted its discussion paper the White House announced that President Biden would be issuing an executive order authorizing all federal agencies under his authority to evaluate the threats and opportunities that crypto poses to national security, and how to address those dynamics respectively. Those agency readouts are expected in the back half of the year.
Whether or not the Fed knew that announcement was coming, its neutrality on the topic of CBDCs was politically astute. In its discussion paper the Fed went to great lengths to stress that it has no formal position on issuing a CBDC, and will only take further steps toward developing a CBDC in the context of broad public and cross-governmental support.
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Will the U.S. have its own CBDC some day?
All this political sound and fury around digital dollars begs the question if the U.S. will issue its own CBDC. The short answer is yes it will. It's almost impossible to imagine that the government of the world's largest economy will disavow the most significant monetary innovation in decades.
The real question is not if the U.S. will launch its own CBDC, but rather a question of when. According to the Fed's actions and statements, whether motivated by political survival or genuine concern for everyday people, it's taking this issue very seriously and genuinely seems to want to build a possible CBDC policy right rather than build it fast.
For now, a measured approach seems like the right approach rather than rushing a slapdash economic fix that cuts to the quick. Most consumers and carpenters would approve.
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FAQs
The US government has seized at least $5.5 billion worth of bitcoin since 2020, according to analysts. Its stake makes it one of the world's largest crypto "whales". Whether it holds or sells its bitcoin stash could have a huge impact on the token's price.
Is the US going to a digital dollar? ›
U.S. President Joe Biden ordered officials to look into a digital dollar in 2022 but it has become a divisive political issue with Biden's Republican rival in this year's U.S. election race, Donald Trump, vowing not to allow it.
How much of the US own crypto? ›
Cryptocurrency awareness and ownership rates have increased to record levels: 40% of American adults now own crypto, up from 30% in 2023. This could be as many as 93 million people. Among current crypto owners, around 63% hope to obtain more cryptocurrency over the next year.
Can you create your own cryptocurrency? ›
Anyone can create a cryptocurrency, but the process requires commitments of time, money, and other resources, in addition to advanced technical knowledge. The main options are creating your own blockchain, modifying an existing blockchain, establishing a coin on an existing blockchain, or hiring a blockchain developer.
Who owns 90% of bitcoin? ›
As of March 2023, the top 1% of Bitcoin addresses hold over 90% of the total Bitcoin supply, according to Bitinfocharts.
Who owns cryptocurrency in the US? ›
Note that if we were to rank countries based on their actual number of crypto owners, India would rank first at 93 million people, China would rank second at 59 million people, and the U.S. would rank third at 52 million people.
Will the US dollar be replaced by crypto? ›
“People often conjecture that cryptocurrencies like Bitcoin may replace the US dollar as the world's reserve currency,” Waller said. “But most trading in decentralized finance involve trades using stablecoins, which link their value one-for-one to the US dollar.”
What is the digital currency to replace the dollar? ›
The Federal Reserve has made no decision on issuing a central bank digital currency (CBDC) and would only proceed with the issuance of a CBDC with an authorizing law.
What will replace the US dollar? ›
But that begs a critical question: What would replace the dollar? Some say it will be the euro; others, perhaps the Japanese yen or China's renminbi. And some call for a new world reserve currency, possibly based on the IMF's Special Drawing Right or SDR, a reserve asset.
Which country has the highest crypto owners? ›
India: Over 100 million people in India own cryptocurrencies, making it the country with the most cryptocurrency owners, according to Triple-A.
F rom the increasingly ferocious federal crackdown on the cryptocurrency business, it might appear the U.S. government cannot stand digital currencies. Yet there is a love-hate dynamic: the Treasury is sitting on a stash of 207,189 bitcoin, worth $5 billion, by far the largest such state-owned hoard.
What is the safest cryptocurrency? ›
The world's first cryptocurrency, Bitcoin, has the largest market capitalization. Its established network, limited supply, and growing institutional adoption make it a relatively safe haven in the volatile crypto market.
How much money do I need to create a cryptocurrency? ›
The average cost of developing a cryptocurrency may range between $38k and $91k. The cost of building a cryptocurrency with medium complexity features may range from $50k to $120k. The cost of building feature-rich coins may range from $121k to $211k.
How long does it take to create a cryptocurrency? ›
If you want to create a cryptocurrency token on other Existing Platforms like Ethereum or Binance Blockchain, it will take around 15 minutes. But if you're going to make your blockchain network for your mineable coin, it will take a bit of time based on various factors.
How long does it take to mine 1 Bitcoin? ›
How Long Does It Take to Mine 1 Bitcoin? The reward for mining is 3.125 bitcoins. It takes the network about 10 minutes to mine one block, so it takes about 10 minutes to mine 3.125 bitcoins.
Did the U.S. government sell bitcoin? ›
Last March, the U.S. government sold off 10,000 bitcoin related to Silk Road, selling just over 9,861 BTC worth $216 million, according to a court filing. As in this case, this event was proceeded by 3 on-chain transactions, which were sent a few weeks prior to the sale's disclosure in a court filing.
Who owns the most cryptocurrency? ›
Satoshi Nakamoto, the pseudonymous creator of Bitcoin, is believed to own the most bitcoins, with estimates suggesting over 1 million BTC mined in the early days of the network.
Does the U.S. government tax cryptocurrency? ›
The IRS treats cryptocurrencies as property for tax purposes, which means: You pay taxes on cryptocurrency if you sell or use your crypto in a transaction, and it is worth more than it was when you purchased it. This is because you trigger capital gains or losses if its market value has changed.
How does the U.S. government seize bitcoin? ›
How Is Bitcoin Seized? Bitcoin is seized by law enforcement as a result of a criminal allegation. Each seizing agency preemptively creates a wallet to temporarily hold the seized bitcoin before custody is eventually transferred to the U.S. Marshals Service for auction.
