Private US banks opposed the issuance of the digital dollar by the US Federal Reserve, as this would give the Central Bank too much power. However, some congressional hearings support the initiative.
The American Bankers Association (ABA), a private consortium of US banks in the speech at the hearing of the American Task Force on fintech said last month that the state cryptocurrency gives too much power of the Federal Reserve System.
The Fed-driven digital currency will “affect social values and privacy,” the American Bankers Association said in a statement. At the same time, at the beginning of the week, regular hearings were held in the Senate of the US Congress and some speakers did not agree with this position.
ABA does not want the Federal Reserve to issue a digital dollar, as it will “threaten the retail banking model” – the one that ABA members rely on. In addition, bankers argue that state cryptocurrency “will affect public values and privacy.”
The US Federal Reserve’s cryptocurrency will turn the Central Bank into an “almost monopolistic provider of currency, bank accounts and payment services,” the association said.
“For controversial but locally regulated purchases such as marijuana and firearms, the central bank’s digital currency would make the Federal Reserve a national arbiter of social issues,” writes ABA. “The right of people to enter into transactions outside the scope of the central bank is treasured civil liberty that is maintained and protected by the proper process of a competitive private banking sector.”
According to members of the association, private banks are the best candidates for issuing digital currencies. However, not everyone agrees with this position. Former chairman of the US Commodity Futures Trading Commission (CFTC) Christopher Giancarlo, head of the newly created digital dollar promotion centre, believes the U.S. cryptocurrency is a great idea.
Giancarlo said at a Senate hearing in the US Congress that the current banking infrastructure has “rusted” and that the state cryptocurrency on the blockchain, developed in conjunction with industry and issued by the US Federal Reserve, is the right way forward.
According to Giancarlo, a digital dollar would help distribute social benefits to Americans who went bankrupt as a result of the pandemic and would also help provide banking services to those who do not currently have access to them.
Giancarlo had previously stated that the US government should begin developing its own digital dollar, independent of central banks. In March, members of the US Democratic Party proposed creating a digital dollar, but later the initiative was excluded from the bill to respond to the coronavirus pandemic.
Recently, Fed Chairman Jerome Powell said private financial institutions should not be involved in the development of government cryptocurrencies.
