Former FDIC Chair Urges The Feds To Get Serious About Crypto
The former head of the U.S. government’s deposit insurance corporation wrote an op-ed last week that the Federal Reserve should consider its own crypto.
Yahoo Finance has published a page on Friday in which Sheila Bair, former head of the US Federal Deposit Insurance Corporation (FDIC) emphasized to seriously consider the prospects of a central bank issued digital currency (CBDC). According to Sheila Bair, if the Federal Reserve will not stay ahead of this technology, not only banking will be obstructed but the Federal Reserve will also be in danger. That is why the Federal Reserve should seriously consider cryptocurrencies.
Bair pointed out that centralized digital currencies will be a more effective tool for conducting monetary policies and to address economic cycles. The central bank issued digital currency will not have the same kind of accountability to large fluctuations in values. It will also give a proper oversight and management by centralized authorities.
In the current scenario, status quo allows the government to slow and stimulate economic activities in the period of boom and recession respectively through the sale of government-sponsored securities directed towards domestic market.
But when the FedCoin, a digital currency which is issued and backed by the Federal Reserve Bank is held by all consumers, the spending will be felt by the consumers directly rather than policy changes of domestic banks. Currently, the change in interest rates encourages savings.
According to Sheila Bair, though centralized digital currency offers a potential downside, it will be a great benefit for the economy. When there will be a digital currency, consumers will want to hold all their wealth in CBDCs. It will naturally cause credit deficits if parameters are not put in place, and ensure the banks and other financial businesses remain competitive against FedCoin.
Bair’s comments come at the time when most of the central banks and government officials around the world are considering the merits of cryptocurrencies.