It seems like Facebook’s new currency, Libra, has regulators scared out of their wits… So much, in fact, that the United States government is now looking into potentially developing its own digital currency – issued by its central bank – as a means of competing.
Libra Has Everyone Terrified
Libra, as we all know, has gotten very mixed reactions from both regulators and the general public in the past, with very few Facebook users saying they would consider using Libra if it was available today. In addition, men like David Marcus – head of Facebook’s blockchain division and the man in charge of Libra – have faced the wrath of the U.S. Senate, who claim that Libra shouldn’t be allowed to continue until all questions about it have been answered.
Now, Mark Zuckerberg – CEO of Facebook – is about to take the stand before the United States Congress in the coming weeks to address all their concerns about Libra’s operations. Still, however, it appears those concerns delve deep if the government is willing to create an entirely new currency as a way of fighting off Libra’s unknown effects.
However, it’s not just Libra that’s pushing the United States’ buttons. Other countries, such as China, have said that they are now considering developing their own digital currencies issued by their central financial institutions. If a country as large and as powerful as China does this, it would likely leave the United States behind, and America would have a hard time competing.
As it stands, the plans are still in “talking phases,” meaning regulators are simply considering how the process should occur. Necessary steps haven’t necessarily been taken yet, as regulators aren’t even sure how a digital payment system should be created or handled. Representative Bill Foster – a democrat from Illinois – recently commented:
A consumer payments system is a natural monopoly; the same way Microsoft Word is a natural monopoly. No one wants to use some incompatible word processor. The question arises – shouldn’t it be the U.S. taxpayer and the U.S. government that does it rather than any private firm?
There are several questions floating about regarding the payment system. For one thing, would the digital currency the U.S. allegedly plans to offer be a virtual unit of USD? Would it be the dollar digitized, or would it be something else? If it’s an entirely new unit, could that possibly have negative effects on paper money?
What Will the Currency Be Like?
Interestingly, some regulators claim to have seen this coming, one of whom is Federal Reserve Bank of Philadelphia president Patrick Harker. He claims that a digital currency payment system issued by the U.S. government is “inevitable” and states:
I think it is better for us to start getting our hands around it.
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Cryptocurrency is a digital currency that uses encryption (cryptography) to regulate the generation of currency and verify the transfer of funds, independently of a central bank. Cryptography is the practice and study of techniques for secure communication in the presence of third party adversaries.
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