FED RELEASES DIGITAL DOLLAR REPORT: GOING CRYPTO?

On 20 January, the U.S. Federal Reserve issued its long-awaited study on the prospect of creating a digital dollar. 
The 40-page report took no position on creating a dollar stablecoin but called its report “the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies.” 
The paper noted a digital dollar’s benefits, including speeding payments and drawing more unbanked people into the mainstream financial system. 
It also highlighted risks, including dangers to personal privacy and financial stability as well as the possibilities for fraud and other criminal uses.   
Regardless, the digital buck “could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank,” the report notes.  
The Fed’s “initial analysis suggests that a potential [digital dollar], if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified,” the report concluded.  
Fed chair Jerome Powell has taken no public position on a digital dollar. Its most prominent proponent has been Fed governor Lael Brainard, whom President Joe Biden has nominated to be the central bank’s vice-chair in charge of policy. 
Other Fed officials have remained skeptical, saying the digital dollar’s benefits are not clear. 
However, advocates point to other nation’s progress in creating their own digital currencies, most notably China, which already has begun widespread distribution of its digital yuan.  
Some fear that China’s leadership in creating a digital currency ultimately could threaten the dollar’s position as the world’s reserve currency, as we reported in “China’s Digital Yuan Could Challenge Dollar’s Leadership” (27 Jul 2021). 
When the public comment period begins, people will have 120 days to voice their views on 22 issues on which the Fed seeks input.  
The Fed will not create a digital currency unless Congress passes a law authorizing it to do so, bank officials have said.  
TREND FORECAST:  Go back to the 23 June 2020 Trends Journal when bitcoin was trading under $10,000 per coin. We had forecast the price would spike much higher “when it solidly breaks above the 10,000 mark.” 
It did, and we have been bullish on it. However, the Trends Journal has continually warned that crypto coins were due for a major tumble when central banks and governments took action to rein them in. 
And, with more central banks planning to go digital in the coming years, they would not tolerate competition. (See our 24 March 2020 article, “FROM DIRTY CASH TO DIGITAL TRASH.”)
Those warnings have become reality. However, it will be years before they are fully implemented by governments and there will still be cryptocurrencies that will attract “out of the government box” investors.