Weekly Business Insights from Top Ten Business Magazines | Week 308 | Shaping Section | 5

Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since September 2017 | Week 308 | August 4 – 10, 2023

A Digital Dollar Is for Banks and Governments, But Not You

By Christopher Condon | Bloomberg Businessweek | August 4, 2023

Listen to the Extractive Summary of the Article

Just a couple of years ago, as cryptocurrency was peaking and China was experimenting with a virtual version of the yuan, Washington was abuzz with the idea that the Federal Reserve could create America’s own digital currency.

Enthusiasm faded as people began to hash out the details. Although in theory digital dollars could provide wider access to the financial system, in practice using them would require a smartphone and a banking relationship, which some low-income people lack. Banks complained that giving consumers a safe way to store electronic cash could lead to a drain on deposits, potentially undermining their stability during a financial scare. Politicians raised fears of government surveillance of retail transactions. And, of course, the crypto crash happened—digital money lost its glamour.

Still, the idea isn’t dead. While you may never spend a digital dollar yourself, a technological leap may be coming for the money that moves among central banks and big financial institutions. Think of it as a wholesale digital dollar. A group of researchers from the New York Fed and a handful of top banks have been experimenting with simulated digital payments. They’ve shown it’s possible to use blockchain-like technology to zip money almost instantly around the world 24 hours a day, 365 days a year.

Efforts to speed up global payments include Project mBridge, an experiment involving the People’s Bank of China and the central banks of Hong Kong, the United Arab Emirates and Thailand. The most advanced project of its kind, it’s testing ways to handle transfers and foreign exchange transactions in multiple digitized currencies.   So far the US is moving cautiously.  Nevertheless, Washington wants a seat at the table when nations work out how to modernize payment networks.

3 key takeaways from the article

1. Just a couple of years ago, as cryptocurrency was peaking and China was experimenting with a virtual version of the yuan, Washington was abuzz with the idea that the Federal Reserve could create America’s own digital currency.
2. Enthusiasm faded as people began to hash out the details. Although in theory digital dollars could provide wider access to the financial system, in practice using them would require a smartphone and a banking relationship, which some low-income people lack. Banks complained that giving consumers a safe way to store electronic cash could lead to a drain on deposits. Politicians raised fears of government surveillance of retail transactions. And, of course, the crypto crash happened—digital money lost its glamour. 
3. Still, the idea isn’t dead. While you may never spend a digital dollar yourself, a technological leap may be coming for the money that moves among central banks and big financial institutions. 

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Topics:  Digital Currency, Crypto, Global Economy