Blockchain

Could a Digital Dollar Bolster the US Economy?

Economies all around the world are facing roadblocks in the form of escalating national debts and threats of inflation, but a digital dollar may be a saving grace for the U.S.

Sponsored
Sponsored

Macroeconomics expert and Soundwise founder, Natasha Che, has postulated why a Federal Reserve-issued digital USD token could change the fate of America.

In a lengthy tweet on Aug 3, the author stated that the U.S.’s largest export is its currency, the dollar. It’s currently the biggest money network in the world, used for 40-50% of global trade settlement and international credits.

Sponsored
Sponsored

With this reserve currency status, Che claims that the U.S. can “get away with murder” for its monetary policy and run up debts to disastrous levels, she explained. World trade expands every year, as does its demand for the dollar, so providing a medium of exchange and store of value for the planet is a lucrative monopoly.

Digital dollar to the rescue?

Currently, the U.S. is continuing to accumulate debt against other countries. This is especially true for China, which sells its exports and takes treasuries and IOUs as payments. Trade deficits accumulated over time will equate to U.S. external debt.

Che suggested a “dollar-as-a-service (DaaS)” export type mechanism whereby America benefits from an intangible seigniorage income. Since this would not be on the books, trade deficits minus “DaaS” would equate to external debts.

“Other things equal, if the US wants to lower its debt, it needs to increase the value of its dollar-as-a-service exports. But how? By making the USD money network bigger and easier to use.”

The greenback is becoming less available outside the U.S. but a central bank digital currency could change all this, she hypothesized. Issuing a crypto-dollar to the world via big tech companies, making APIs available for anyone to build on, and making the network interoperable with major public blockchains could be beneficial for the Federal Reserve.

Stablecoins such as USDT and USDC have already emphasized the demand for digital dollars, so an official one may be a way to “weaponize” the currency. The U.S. already fears that China is doing exactly that.

All talk, little action  

While China has already launched several pilots for its central bank digital currency, the U.S. is still way behind, constantly tripping over its own regulatory hurdles and stomping on stablecoins.

On July 30, Federal Reserve Governor Lael Brainard laid out a range of reasons for urgency around issuing and developing a U.S. digital dollar. He told the Aspen Institute Economic Strategy Group:

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that. That just doesn’t sound like a sustainable future to me.”

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

Share Article

Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

Follow Author

Source: https://beincrypto.com/digital-dollar-bolster-economy/