Former U.S. regulator leads effort to create digital dollar
The project will explore how a cryptocurrency could produce a more efficient and safer means of cross-border trade, clearance and settlement.
The former chair of the Commodity Futures Trading Commission (CFTC) has partnered with Accenture to create the non-profit Digital Dollar Project, which plans to explore the creation of a U.S. Central Bank Digital Currency (CBDC).
“The digital 21st century is underserved by an analogue reserve currency,” said Chris Giancarlo, former CFTC chair under Presidents Barack Obama and Donald Trump. “A digital dollar would help future-proof the greenback and allow individuals and global enterprises to make payments in dollars irrespective of space and time.
The purpose of the Digital Dollar Project is to encourage research and public discussion on the potential advantages of a digital dollar, convene private sector thought leaders and actors, and propose possible models to support the public sector. The Project will develop a framework for practical steps that can be taken to establish a dollar-based CBDC.
A cryptocurrency backed by fiat cash is known as a stable coin.
A “tokenized” U.S. currency would coexist with other Federal Reserve liabilities and serve as a settlement medium to meet the demands of the digital world and a cheaper, faster and more inclusive global financial system, Giancarlo added in a statement.
Joining him in leading the project is his brother, Pure Storage CEO Charles Giancarlo, and the CFTC’s former chief innovation officer, Daniel Gorfine.
Because of Accenture’s experience working with central banks on digital currency and related initiatives, the consulting firm is an “ideal technology partner” in the Digital Dollar endeavour according to Martha Bennett, a vice president at
Chris Giancarlo pointed out Accenture central bank projects that have included the Bank of Canada, the Monetary Authority of Singapore, European Central Bank, and most recently efforts by Sweden’s Riksbank – the world’s first central bank – to develop an e-Krona in a test environment.
“So they were the obvious choice for guiding this process,” Giancarlo said.
While at the CFTC, Giancarlo pressed the agency for clarity around the regulatory framework of cryptocurrencies and once told the Senate Banking Committee it should not ignore cryptocurrencies but embrace technological advances, earning him the moniker “Crypto Dad” by some in the industry.
In general, however, U.S. regulators and President Trump have not looked favourably on cryptocurrencies, cash-backed or otherwise, compared to European and Asian nations. Some central banks in those regions are in the final stages of launching digital currencies, including China’s digital yuan and Russia’s e-Ruble.
“The regulators in those countries are on board because they’re either driving the initiatives themselves, or they’re closely involved,” Bennett said via email. “Having a former regulator driving this [U.S.-based] initiative puts it in a different league: this is clearly not about private sector firms launching initiatives that may or may not compete with national currencies, or potentially having a destabilizing influence.”
The race to integrate crypto into global banking is real as public sector projects are already driving interest in fiat-backed cryptocurrencies by central and regional banks.
The U.S. dollar is the world’s “reserve currency” because it represents about 58% of all foreign exchange reserves in the world, according to the International Monetary Fund (IMF). Additionally, 40% of the world’s debt is denominated in dollars.
Some experts believe the U.S. dollar could fall behind as the defacto eCommerce currency if other nations launch state-sponsored stablecoin first.
“In 2020, we at KPMG expect to assist regional and central banks in the development of well-defined technology frameworks that can anchor private-sector initiatives,” Arun Ghosh, U.S. Blockchain Leader at KPMG, said in a recent blog post.
In a blog post, the IMF said recently today’s fiat currencies are in flux “and innovation will transform the landscape of banking and money.”
Among other banking entities, the IMF has shown support for fiat-backed cryptocurrencies, saying they can reduce the reliance on government-issued money, “and unlike bank transfers, crypto asset transactions can be cleared and settled quickly without an intermediary,” Dong He, deputy director of the IMF’s Monetary and Capital Markets Department, wrote in a post for the agency.
“The advantages are especially apparent in cross-border payments, which are costly, cumbersome, and opaque,” He said. “New services using distributed ledger technology and crypto assets have slashed the time it takes for cross-border payments to reach their destination from days to seconds by bypassing correspondent banking networks.”
Unlike private digital token initiatives, such as Facebook’s Libra digital coin, as well as other financial instruments that are more like derivatives or money market funds, the Digital Dollar Project’s cryptocurrency would be central bank-controlled money.
JP Morgan Chase’s planned JPM Coin, for example, is neither a stable coin in its current format nor a cryptocurrency, according to Bennett.
“It’s a token representing a dollar in the current system (in European terms, it would be classed as e-money),” Bennett said. “A CBDC is different in that it’s – by definition – issued by a central bank and hence subject to different control and stability mechanisms. It’s also worth noting that [a] US CBDC has safeguards that a Libra or equivalent wouldn’t have, and not all other CBDCs would necessarily feature: government access to data is constitutionally restricted.”
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