The US Federal Reserve is not planning to launch its own cryptocurrency

Aleksander Berentsen, a researcher at the Federal Reserve Bank of St. Louis, and his colleague, Fabian Schar, wrote an article in which they recognized that it is easy for central banks to create their own cryptocurrency.

"However, the key features of cryptocurrencies are a red flag for central banks," the researchers noted. The document, entitled "The case for the electronic money of the central bank and the non-case for the cryptocurrencies of the Central Bank" explained that it is imperative for the forces of the order that the identity of the persons involved in the financial transactions is note publicly.

Preventing financial crimes

In order to prevent financial crimes such as drug trafficking, terrorism and money laundering, police officers must be able to easily identify the sender and recipient of monetary transactions. If a bank were to create a blockchain-based cryptocurrency without authorization, then it would not be easy to determine the identity of the individuals involved in the transactions. This means that it would not make much sense for central banks, controlled by centralized governments, to develop their pseudonymy cryptocurrency, say the researchers.

More than likely, a digital currency issued by the central bank would not be a decentralized or peer-to-peer (P2P) money transfer system, but rather a centrally managed form of electronic money. Therefore, the researchers said that the creation of a "Fedcoin" or any other cryptocurrency of the central bank is somewhat naive. "

Moreover, "the technology for the issue of virtual money in a centralized manner existed long before the invention of the blockchain," explained the research paper. In May 2018, Lael Brainard, a governor of the Federal Reserve Board, said that digital currencies of the central bank (CBDC) would not be useful as virtual currencies proved to be highly volatile. As such, they are not able to function effectively as a medium of exchange (MoE) or a store of value (SoV), Brainard noted.

Responsible for IMF: all banks should consider the initiation of a cryptocurrency

His comments came during the Decoding Digital Currency Conference held in San Francisco. Although Brainard was critical of the CBDC, it seemed struck by blockchain technology and its ability to improve the efficiency and transparency of the various business processes.

Although the US Federal Reserve is not planning to develop its own cryptocurrency, it is possible that central banks in other countries may launch their own digital currency. As reported by CryptoGlobe in November, Christine Lagarde, the head of the International Monetary Fund (IMF), said that all financial institutions should seriously consider exploring the possibility of issuing their virtual currency.

Lagarde, a French political expert and lawyer, said that blockchain technology is "safe, cheap and potentially semi-anonymous" and that central banks could benefit from the use of cryptocurrencies as they could help "provide money to the 39; digital economy ". added that digital money could promote economic and financial inclusion, as a high percentage of the world's population does not yet have access to modern banking services