The future of currency could become completely digital…and not just decentralized currency like crypto, either. The Federal Reserve is studying whether they want to get into the digital currency game, and it has current crypto-holders concerned.
The Fed is considering issuing their own digital currency called Fedcoin.
Fedcoin would be based on blockchain technology.
If you don’t know what blockchain is, here is a brief explanation courtesy of Motley Fool:
The digital and decentralized ledger that records all transactions. Every time someone buys digital coins on a decentralized exchange, sells coins, transfers coins, or buys a good or service with virtual coins, a ledger records that transaction, often in an encrypted fashion, to protect it from cybercriminals. These transactions are also recorded and processed without a third-party provider, which is usually a bank.
According to Investopedia, “Digital currency relies on a secure and immutable ledger to track transactions. This also makes it possible for seamless and direct transfers, without intermediaries and between recipients which simplifies the implementation of monetary policy in an economy.”
The Fedcoin would be a central bank digital currency, which is referred to as CDBC.
“The term central bank digital currency (CBDC) refers to the virtual form of a fiat currency. A CBDC is an electronic record or digital token of a country’s official currency. As such, it is issued and regulated by the nation’s monetary authority or central bank. As such, they are backed by the full faith and credit of the issuing government,” according to Investopedia.
So far, there are 83 countries studying the viability of CBDCs, including China, considered to be the farthest along in the process.
Russia and England have also put thrown their hat into the CBDC game, as well as Sweden, Canada, Thailand, Venezuela, and Singapore.
But China is ahead of the game and has actually tested its CBDC in the marketplace.
According to CNBC: “China has already given away millions of dollars worth of the digital currency in real-world trials in a number of cities including Shenzhen, Chengdu and Suzhou. These involve the local government handing out a certain amount of yuan via a lottery. Users usually have to download a separate app to receive the currency. JD.com, one of China’s biggest e-commerce players, was involved in the trial and allowed customers to purchase items with the digital yuan.”
We live in the digital age, so it makes sense that the next frontier is digital currency.
How long it takes to implement the Fedcoin system is still an open question.
But it appears that day is coming.