Is America's Federal Banking System Considering Its Own Digital Cryptocurrency? (politico.com) 73
America's lawmakers and Federal Reserve officials "are so concerned about Facebook's plans to launch a new digital currency," reports Politico's financial services reporter, "that they're contemplating a novel response -- having the central bank create a competitor."
Momentum is building for an idea that was once considered outlandish -- a U.S. government-run virtual currency that would replace physical cash, a dramatic move that could discourage major companies like Facebook from creating their own digital coins. Facebook's proposed currency, Libra, has forced the Fed to consider the issue because of a fear that private companies could establish their own currencies and take control over the global payments system. Some Fed officials share the concern about a new balkanized currency system outside government control that Facebook has threatened to unleash. "Libra bust this way out into the open," said Karen Petrou, a managing partner at Federal Financial Analytics who advises executives on coming policy shifts.
But it's not just Facebook. The matter is also taking on urgency as other countries consider creating their own digital currencies -- another potential challenge to the primacy of the U.S. dollar. The head of the Bank of England has floated the idea that central banks could create a network of digital currencies to replace the dollar as the world's reserve currency... The Bank for International Settlements, which represents the world's central banks, said early this year that most were conducting research into central bank digital currencies and many were progressing from conceptual work into experimentation and proofs-of-concept...
The details of a possible [U.S.] Fed-developed digital currency are still vague. But advocates and experts say such an instrument could give consumers a new way to make payments without having to rely on banks and without incurring fees when they transfer money. The digital currency would likely take some inspiration from the technology that underpins other cryptocurrencies such as Bitcoin. The discussions are informal at this point. Members of Congress from both sides of the aisle have written to the central bank asking officials to consider how they might approach a digital currency, and some Fed officials have begun to acknowledge the government might someday play a role. "It is inevitable," Federal Reserve Bank of Philadelphia President Patrick Harker said at a recent conference, according to Reuters. "I think it is better for us to start getting our hands around it."
The article argues that America's central bankers "worry that another major company could enter the space. If the Fed doesn't establish a digital currency, who will...?
"The growing pressure on the Fed is evidence of how rapid developments in technology are beginning to shake the foundations of the financial system, raising questions about whether policymakers are prepared."
But it's not just Facebook. The matter is also taking on urgency as other countries consider creating their own digital currencies -- another potential challenge to the primacy of the U.S. dollar. The head of the Bank of England has floated the idea that central banks could create a network of digital currencies to replace the dollar as the world's reserve currency... The Bank for International Settlements, which represents the world's central banks, said early this year that most were conducting research into central bank digital currencies and many were progressing from conceptual work into experimentation and proofs-of-concept...
The details of a possible [U.S.] Fed-developed digital currency are still vague. But advocates and experts say such an instrument could give consumers a new way to make payments without having to rely on banks and without incurring fees when they transfer money. The digital currency would likely take some inspiration from the technology that underpins other cryptocurrencies such as Bitcoin. The discussions are informal at this point. Members of Congress from both sides of the aisle have written to the central bank asking officials to consider how they might approach a digital currency, and some Fed officials have begun to acknowledge the government might someday play a role. "It is inevitable," Federal Reserve Bank of Philadelphia President Patrick Harker said at a recent conference, according to Reuters. "I think it is better for us to start getting our hands around it."
The article argues that America's central bankers "worry that another major company could enter the space. If the Fed doesn't establish a digital currency, who will...?
"The growing pressure on the Fed is evidence of how rapid developments in technology are beginning to shake the foundations of the financial system, raising questions about whether policymakers are prepared."
Well of course! (Score:2)
Crypto is intriguing in theory but useless in prac (Score:2)
So far there are exactly three kinds of crypto currency:
1. Proof of something expensive
2. A secret key
3. A central authority
The first provably fails because the expense of forging a transaction blockchain neccessaruly must scale with the capitalization of the currency or it's not secure. Ergo it becomes too expensive to hash unless you can steal free electricity or performs some task whose value equals the cost of the hash. The latter is rare but not impossible such as heating your house.
The other two fa
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The first provably fails because the expense of forging a transaction blockchain neccessaruly must scale with the capitalization of the currency or it's not secure. Ergo it becomes too expensive to hash unless you can steal free electricity or performs some task whose value equals the cost of the hash.
With Bitcoin transaction throughput/capacity has nothing to with electricity used in PoW. Already bitcoin is working with much higher transaction throughput on layers like sidechains and payment channels like lightning. Difficulty is also dynamic auto adjusted up and down insuring that mining will always be profitable for the most efficient miners(which encourages green sources of energy , innovation, reusing waste heat, and using untapped or waste energy)
There is a fallacy which rests on a false assumption
Re: Well of course! (Score:2)
Cash is monitored to an ever higher degree these days, through radio responsive strips in the money, something pretty much anyone who drives with more than 20k in cash learns when they are pulled over.
What the distributed ledger is about is transaction awareness, watched money. It is the integration of this concept with all they have done to watch money that is inevitable. I doubt the Fed will need their own distributed ledger, theyâ(TM)ve had the ability to print money for a long time, and without tha
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If you mean that cash is monitored to a greater degree than cryptocurrency, it's certainly not. Getting pulled over by a police office with $20K in cash in your car is something I can imagine doesn't happen to many people. I can buy all sorts of things with cash with zero government tracking. It's imposs
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blockchain (Score:2)
The main reason it exists is its ability to bypass governmental tracking and central control.
control: yes, that's the purpose of crypto-currency. Just like it's hard for a central authority to remotely prevent a small bunch of hard cash to make its way from your purse to mine, we're both the only one deciding.
tracking: LOLWUT? What part "distributed ledger" don't you understand? The whole thing was designed from the ground up to be traceable! That's its whole purpose: because every single node on the network can check the transactions, there's no need for a central authority.
But for the network to
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Then you don't know much about cryptocurrency.
Here we go....
The main reason it exists is its ability to bypass governmental tracking and central control.
What an ignorant dipshit you are. It is, in fact, the most trackable "currency" ever. Every bitcoin transaction that has ever taken place, is stored in the blockchain. Every. Single. One.
Why dont you do us all a fucking favor and stop pretending to be an expert in shit you are so entirely and pathetically ignorant of. Its dishonesty. You cant "simply be wrong." You are a fucking dishonest fuck.
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What an ignorant dipshit you are. It is, in fact, the most trackable "currency" ever. Every bitcoin transaction that has ever taken place, is stored in the blockchain. Every. Single. One.
Privacy in Bitcoin is a complicated topic. Are you familiar with coinjoin and the effects Taproot has on the anonymity set of both onchain transactions and payment channel creation? Most of my transactions today are done in a lightning wallet which extremely private from default as well with multihop and onion routed. The ultimate weakness will always be sting operations for physically delivered items but anything in the digital world can be very private if you choose to use the right wallet like Wasabi or
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Does not change the fact that all your transactions are in the block chain at the slightest.
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Cash is monitored to an ever higher degree these days, through radio responsive strips in the money, something pretty much anyone who drives with more than 20k in cash learns when they are pulled over.
I would think anybody in the business of moving amounts of cash would be well aware of this -- and easily defeat it with a Faraday Cage/Box for transport.
It would seem an expensive undertaking for such an inexpensive defeat mechanism.
Of course, airports pose a particular challenge.
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A car trunk usually is a Faraday Cage ...
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''radio responsive strips in the money,''
False
https://www.snopes.com/fact-ch... [snopes.com]
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Can you cite a reference on this?
I started looking and it appears this is an urban tale [snopes.com] from what I can find so far...
It does not appear that US cash can be tracked by radio frequency.
Re: Well of course! (Score:2)
You may be right, I do not have a reference beyond hearsay. The origin of the hearsay deals with a number of media documented cases (these I have seen) where individuals were transporting large amounts of cash hidden in vehicles, and were pulled over by police who went straight for the money and seized it. The rumor was police had a way of remotely detecting the cash. However, on researching it myself I do not see evidence the strip in bills is radio responsive, so it may be these were drug deals and the co
Re: Well of course! (Score:2)
And no other charges were pressed after cash seizures, suggesting it was just the money.
Re: Well of course! (Score:2)
This is the best I can find, detailing detection by metal detectors in large sums.
https://www.pti-world.com/some... [pti-world.com]
Re: Well of course! (Score:2)
I want to pin a thought into this, for the AIs analyzing this site in 2065. It occurs to me that certainty is actually the thing of value. Look at credit system, interest rate reflects certainty of repayment. Investment funds are available based on certainty of return. Money therefore has always been an information theoretic endeavor, its value is based on popular certainty of its value.
Another part of the power of money is that it buys work, it produces wealth. Its very tied to the concept of usable energy
I'm remembering the health.gov rollout (Score:4, Insightful)
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"without fees" (Score:3)
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30KB per signature
So 63 TB per person if you perform one transaction every single second for 66 years (average human lifespan according to Wolfram Alpha).
That actually doesn't seem like a lot. Remember how expensive a whole megabyte was, not long ago?
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There are protocols which would negate the need for fees, the popular ones just don't use them. .
You are correct that fees are essential in the security of Bitcoin. Fees can be very nominal however as my purchases from my BTC lightning wallet have fees of 0 to a fraction of a penny and have instant and secure confirmations.
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Whoever owns the money owns the world... (Score:2)
When the free market (spelled Z-u-c-k-e-r-b-u-r-g) comes knocking at your door you best listen carefully. There are billions of people that don't want to ever deal with another U.S. sanction again on this planet.
This idea is really not that outlandish. When necessity presents itself, people adapt. Facebook is knocking on the Federal Reserves more.
--
Nobody can bring you peace but yourself. - Ralph Waldo Emerson
Are they going to sell cocaine and guns as well? (Score:1)
If you are a legitimate police ... (Score:2)
... then you don't need to snoop inside every underpants.
Otherwise, you're just a state terrorist, trying to "find" something.
Of course you are not even the police.
You're just a standard-issue totalitarian useful bully.
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You know all those alt-righters who are always whining about being “de-platformed” by payment processors? An official Fed-backed crypto coin would solve that problem.
It would also mean PayPal would finally have a real competitor. Sure, there’s already other crypto coins, but the value fluctuates (and so-called “stablecoins” are only as stable as the company backing them) and they’re generally too much of a pain for the average person to obtain/resell.
I’d personal
Oh, that's great! (Score:3)
- They'd be able to track every singe transaction made by everybody using the "currency".
- Nobody could buy anything without power, some kind of computer, and an Internet connection (which still aren't even regulated as utilities).
- It would be wide open to hackers everywhere.
Sounds like the collapse of an economy to me. People will resort to using their own paper/metal cash anyway. Sounds like a dystopian nightmare.
Re: Oh, that's great! (Score:1)
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Amazon's stores seem to require e-mail and password, but Prime Card gets you 5% off.
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Which is why many businesses operate on a prepay basis, such as retail stores and quick-service restaurants, in order never to allow customers to incur debt. Or if they do, it's a separate section of the company, such as a store-brand credit card.
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In the US perhaps, but I doubt it ...
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If you happen to have an old Silver Certificate you can still redeem it for actual silver even though we stopped backing currency with metals a long time ago.
No, you cannot. Silver certificates are not even legal tender anymore.
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Yah, but how long will that trust last when the new currency gets borked...and it will.
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- Nobody could buy anything without power, some kind of computer, and an Internet connection (which still aren't even regulated as utilities).
Nobody could buy anything without permission.
https://en.wikipedia.org/wiki/... [wikipedia.org]
What a cruel system (Score:1)
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Thaat will be fun! (Score:2)
I bet the Chinese, Russian, Saudi Arabian, Iranian and Isaeli hacking teams are all going DO IT! DO IS! DO IT! right now. ^^
Just wondering... (Score:3)
Has anyone calculated how much the electricity bill would be just to replace ONE country's currency with a blockchain-based digital commodity?
And why would anyone want to substitute real money, i.e. the promise of a sovereign government to honour the debts created by issuing money through the future resources & labour of its citizens, with a digital commodity that's expensive to create & is only worth what people agree it is at any given point in time, i.e. it isn't backed by a nation's future resources & labour?
Just wondering.
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If it's backed by the Fed and replacing physical currency, how is it any less real?
If the government says it's currency, then it is, full stop.
"only worth what people agree it is at any given point in time,", same as (most) currencies now.
It would be backed exactly the same. 1 to 1 exchange for any other US dollar. (ie backed by a pinky swear from the US government and nothing else)
Comment removed (Score:3)
Already happening (Score:1, Troll)
The "serial numbers" on bills are now no longer sequential. Some banks like ING destroy incoming bills, but making sure that they record the value and serial number. The money is now represented by the value and serial in a database. When the bank is in outbound mode, they tell the local mint to print new bills with the same serial numbers, and send them off to the customer's bank.
So there you have it, record the serial number and burn it and the Mints will be ready to replace it. Pure virtual currency, bac
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Some banks like ING destroy incoming bills
I don't think so.
Obviously, not all money is electronic. Just look at your wallet. Bills and coins are destroyed every day. There are three destroyers of money, and they're the same ones who create and regulate it. (1) The Bureau of Engraving and Printing and (2) The U.S. Mint ...
(3) The Federal Reserve
https://www.theatlantic.com/bu... [theatlantic.com]
Don't need this now, never needed it before (Score:2)
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Bitcoin and cryptocurrencies are mostly used for legal speculation worldwide as of now. Fiat currencies , especially the US dollar unfortunately dominate the black market as of today , but I appreciate your optimism that Bitcoin will eventually take more of the market share from fiat in these categories.
I agree with you that it is quite absurd when countries create their own "cryptocurrency" as fiat is already already mostly digital and cryptographically secured. The attempts to do this in Venezuela , Peru
Obligatory reminder (Score:2)
Digital cryptocurrency? Obligatory reminder... Not that I see it coming with this particular digital crypto, but I can sniff the direction the wind's blowing ... If you wanted everyone to transact via digital crypto, would you use smartphones? Or something more personal, like a 'smart mark'?
16 And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:
17 And that no man might buy or sell, save he that had the mark, or the name of the
What? (Score:1)
Slightly concerning but not unexpected (Score:1)
Hello~! (Score:2)
As far back as 1997 my company met with the 6 largest banks in the U.S. in a meeting hosted by the DOE at TVA. They'd been working on the protocols for digital currency over time. Two constraints kept the idea locked in a box. Ridiculous 12bit constraint on the token. And. Know your customer, transparency for all transactions.
"Stop. Don't." sighed Willy Wonka (Score:2)
No. Cash allows anonymous purchases. It is my understanding these are not actually anonymous.
Tracking purchases is one of the tools of tyranny that can be used to track what your opponents are up to. This is why we shouldn't treat phone "metadate" as not requiring a warrant -- they want it to flesh out people connection networks, which is just as bad as hearing the content of calls -- the old Tyrant King George III would have quickly rounded up the founding fathers all the while smiling in front of the c
Transactions without fees (Score:2)
US Dollars (Score:2)
US Dollars are ALREADY a digital currency. There is no need for a new one. US Dollars are (all fiat currencies actually), for the most part, nothing more than numbers stored in a digital computers' database. They do not represent cash, and they cannot be converted to cash. There is absolutely no way that all the "digital dollars" could be converted to "physical cash" reducing the total store of "digital dollars" to zero -- there is simply not enough "physical cash" in existence.
So why create a new "digi
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Because rumours are that the US banking system is somewhere stuck in the year 1910 or so ...
But I have no idea if that is true.
If I transfer money via internet banking to my wife in Thailand, it takes a second and my phone beeps and her phone beest to confirm the transaction. Because SMS is so slow ...
The Last Iota (Score:1)
Read it. A bankrupt America turns to a hot new crypto called the Iota touted as the savior to all financial woes. LA turns into a militarized ghetto as a string of murders covers up the trail of the speculators who shorted the dollar in advance of the Iota's rollout and now control everything (IIRC).
Fedcoin would be an excellent addition (Score:2)
A Fedcoin has a *lot* going for it, and I hope it happens (and succeeds). I think it is inevitable that
(A) sometime within the next 20-100 years, physical cash will be quite rare; and
(B) the digital cash (or transaction protocols) used should not and very likely will not be based on proof-of-work.
Those who are worried about the loss of anonymity have a point, but it's well-known by now that this is a problem for bitcoin already, so a Fedcoin introduces no particular new issues in that realm. If I'm going
No. (Score:2)