President Donald Trump’s nominee to the Fed Reserve Board, Judy Shelton, has told US lawmakers that digitizing the US dollar (USD) should be a priority for the country as it would allow them to maintain their global dominance.
Digital Dollar is Needed to Stay Ahead
Judy Shelton, Trump’s nominee to the Federal Reserve Board, was addressing the Senate at her confirmation hearing on Thursday, February 13. She pointed out that the United States needs fintech innovation to help them stay ahead of their competitors.
Shelton noted that although the US dollar is currently the dominant currency in the world, they shouldn’t rest on their laurels, as competitors are working hard to find alternatives to the USD. She stated that it is essential that the country gets ahead of the curb to ensure that the US dollar retains its position as the best currency in the world.Tom Cotton (R-Arkansas) quizzed Shelton about the need for a digital dollar, to which she responded that having a digital dollar is extremely important, and that the Fed is compelled to think about it.
Shelton is right about the need for a digital dollar as other countries are already taking the necessary steps, such as China which is actively developing the digital yuan. Meanwhile, private entities, like Facebook, are also working on cryptocurrencies such as Libra, which is set to gain global dominance.
The launch of these digital currencies could reduce the dominance of the US dollar on the international stage. As a result of this, it is evident that there is a need for the US Fed to develop a digital dollar as a means of staying ahead in the global currency war.
Shelton has been a supporter of the gold standard, which pegs the USD to gold, and she is against the Fed’s easy-money policies. She now views digital currencies in the same light as gold. The board nominee pointed out that the gold standard allows countries to participate voluntarily as they work according to the discipline of the gold convertibility of their own currencies. “A modern version of this approach—one that permits the issuance of virtual currencies in tandem with government-issued currencies, adapting legal tender laws to permit healthy currency competition—should be put forward,” she added.
US Fed Now Serious About The Digital Dollar
There have been talks of developing a digital dollar in recent weeks and it shows that the US Federal Reserve is serious about the development of the digital currency. Two weeks ago, former officials of the Commodity Futures Trading Commission (CFTC) put together a non-profit entity to come up with proposals regarding a digital dollar. This was followed by Fed Chairman Powell addressing lawmakers earlier this week and telling them that the Libra was a wakeup call for the Fed Reserve. He added that they are currently researching the technology and would be providing updates along the way.
Powell’s comments coincide with that of Lael Brainard, who is currently a governor of the US Federal Reserve. Brainard stated that the central bank is currently researching and experimenting with digital ledger technologies. She added that the central bank is investigating the potential use cases of digital currencies. If successful, the Fed will also consider the development of a central bank digital currency (CBDC).