What Would Be The Impact Of A USA Crypto’?|Biden Administration heads to implement digital sawbuck

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US Presidency Joe Biden has ordered the federal government to look into creating a digital dollar, this could be a step to change how money moves and is used across the globe.

Before his order becomes an actual greenback, there are a variety of major implications as well as risksthat must be taken into account first.

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It would still be an American dollar issued by the US Federal Reserve central bank, as are all US coins and bills today, but in a digital format that is accessible to everyone including financial institutions.

In contrast to money that is deposited into an account with a bank, or used through apps such as Venmo as well as Apple Pay, it would be tracked in the account that belong to the Federal Reserve, not a bank.

Additionally the digital dollars would be the same value as the paper currency, a difference from cryptocurrency, which have highly volatile valuations.

There are many questions that remain unanswered such as whether a digital currency is based upon blockchain technology like bitcoin or if it would be connected to a payment card.

Biden is requesting agencies such as those at the Treasury Department, to examine various issues on the topic.

If the government decides to pursue the idea with the digital currency, it could take "a number of years" before we can implement digital currencies -- authorities will have to explore what technology they want to make use of, according to Darrell Duffie, a digital currencies experts in Stanford University in California.

It will reduce or remove transaction costs since exchanges wouldn't have to go through banks as well as bank cards or apps which charge commissions for every transaction.

Proponents say it would help those who do not have bank accounts which is about 5 percent of household in the United States, and could make it easier for the government to pay benefits.

There are risks , such as a security breach or a system failure Also, there are concerns over privacy, given that the government could theoretically gain access to all transactions.

The banking system could also be undermined as banks currently make use of customer deposits for lending to others and by using a digital dollar, they'd likely have less funds to draw from.

A US 'digital dollar' could have far advice reaching consequences on the world financial system Photo: AFP / Asif HASSAN

International transfersare usually costly and slow are a great opportunity to speed up the process.

An operation that currently takes two days for to be valid could be completed in just an hour, claimed Marc Chandler, a foreign exchange expert for the broker Bannockburn.

For Chandler his geopolitical responsibilities, the role of the US dollar will not be changed by the digital version's introduction.

Digital dollars would be "a natural evolution rather than a revolution" said the official. noted, recalling the fact that over $6.5 trillion is exchanged in electronic format every day in the exchange market for foreign currency.

Even in the event that China creates a large-scale digital currency, such as the one currently being discussed, he added that it doesn't mean that this will change China's role in the global economy, as "there will always be questions of trust, transparency, depth of markets."

For Stanford's Duffie But, if they are to ensure that United States wants to continue to benefit from its status as the primary currency used for reserve bank accounts and international payments, it's essential that the government tread with caution.

"The US are going to need to ensure that they stay in a leading position in international forums that discuss standards for making cross-border payments standards for digital currencies," he stated.

Others are working on digital versions of their own currencies, including the eurozone to India but "there is no evidence to suggest being first to market provides any significant or material advantages," said Jamiel Sheikh, founder of CBDC Think Tank.

The reverse is true, a failure due to unintended consequences poor usage, or other problems can undermine confidence in the institution that issuing it, he noted.

"The overwhelming dominance of the dollar gives the US the luxury of learning from... other countries," agreed Cornell University professor Eswar Prasad.

If designed properly the digital dollar can be more appropriate for use at home rather than a cryptocurrency Duffie.

For international transfers, however the banker said he was "skeptical that large central banks like the Fed or the ECB, China or Japan, will give accounts at the central bank to people all over the world."

In the event that United States did so, as he said, it could ruin the financial system of small nations where citizens may prefer to use the digital dollar instead of the local currency.