Former Chairman of the CFTC Pushes for New US Dollar As Race for Digital Currency Heats Up
In an op-ed published by the Wall Street Journal, J. Christopher Giancarlo, former Chair of the Commodity Futures Trading Commission (CFTC), and Daniel Gorfine, former Chief Innovation Officer of the CFTC, urge the US government to consider a digital dollar.
The article, entitled “We Sent a Man to the Moon. We Can Send the Dollar to Cyberspace,” lands as China and Canada, among other governments, are devising plans to go digital.
According to a report by CNBC,
“Based on recent conversations and meetings in Beijing, RBC [Capital Markets] told clients this week that China ‘has expedited its development of a Central Bank Digital Currency’ after Facebook’s announcement in June.”
The People’s Bank of China is reportedly moving quickly to disrupt the current financial system with a new government-backed digital currency.
RBC Capital Markets analysts Mark Mahaney and Zachary Schwartzman relayed in a research note to clients,
“If U.S. regulators ultimately dismiss Libra and decide not to draft regulation to encourage Crypto innovation in the U.S., China’s [Central Bank Digital Currency] may be strategically positioned to become the de facto global digital currency in emerging economies, largely through Alipay, WeChat, UnionPay and other messaging & payment apps.”
While China’s strategy is being heard around the world, governments from Peru to Tunisia are reportedly creating or researching digital currencies. They include projects being led by the following countries.
- The Marshall Islands
- UAE and Saudi-Arabia
- The Bahamas
- The Netherlands
So far, the US has lagged and has no current plans to create a digital dollar. Instead, senators have been targeting Facebook’s controversial Libra stablecoin project while high-ranking officials, from President Donald Trump to Treasury Secretary Steven Mnuchin, have condemned cryptocurrencies.
Despite objections to the Libra stablecoin, which senators have characterized as a direct competitor to the US dollar, the project is moving full steam ahead. After losing key members earlier this month, the Libra Association has now established its official charter with 21 remaining founders who signed on the dotted line at the organization’s inaugural meeting in Geneva on Monday.
In their WSJ piece, Giancarlo and Gorfine attempt to bring the US up to speed. They detail how a digital dollar could be launched and governed through a public-private partnership between banks and the Federal Reserve.
“We propose a digital dollar—a government-sanctioned blockchain protocol, created and maintained by an independent nongovernmental group but administered by banks and other trusted payment organizations. Cash brought into the system would be exchanged for digital U.S. dollars on a blockchain, with the cash lodged in special escrow accounts maintained by the Federal Reserve.”
According to their proposal, the new payment network would rely on regulated intermediaries to maintain digital wallets and validate transactions, unlike Bitcoin which relies on a decentralized network of miners. However, the authors believe that such a system, like Bitcoin, could tap into the potential advantages of distributed-ledger payments, “such as much higher transaction speed, enhanced access and greater transparency.”
“This should mean lower costs for businesses and consumers and new economic models based on real-time transactions and micro-payments.
Security would be another major advance. Because no individual validator of the payment ledger would hold complete information regarding all payments, the system would solve some of the privacy and antitrust concerns that arise when a single intermediary—like WeChat or a foreign central bank—holds complete information.”
Notably, they outline how such a digital dollar would allow the US to retain its currency dominance.
“Most important, compared with a private or foreign digital currency, this system would extend the central role of the U.S. dollar in global finance and allow it to compete confidently in the new digital era. The first major digital-currency initiative to draw American users would be fully and unequivocally backed by the greenback.”
Earlier this month US representatives French Hill and Bill Foster issued a letter to the Federal Reserve Board expressing their concerns about the US dollar and proposed that the central bank is well-positioned to create a digital currency. Philadelphia Federal Reserve Bank President Patrick Harker has also said that such a currency is “inevitable”.