Ex-Fed Official: Replacing U.S. Dollar Dominance with Crypto Not Feasible

Ex-Federal Reserve official has responded to a proposal that a cryptocurrency can have more benefits for the international markets than the U.S. dollar, Bloomberg reported on 25 September.

Last month, during the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, the Governor of the Bank of England, Mark Carney, argued that the U.S. dollar’s dominance should be ended and replaced with a digital currency, such as Facebook’s stablecoin Libra. During his speech, he also said that a digital currency will be a better option than another fiat currency, like the Chinese yuan. He said:

“In the longer term, we need to change the game. When change comes, it shouldn’t be to swap one currency hegemon for another.”

In response to his comments, Simon Potter, a former senior Federal Reserve official, told Bloomberg that Carney’s speech had ignored the “benefits of having the greenback as a reserve currency”, and that his case had “no argument” to support it. He added:

“I see no argument that makes sense to have something that complicated out there when you have large, liquid capital markets in the U.S.. Not having one currency that you can basically price things and have a deep market in, that makes life much harder for the global economy.”

Potter further added that central banks are unlikely to work together on a virtual currency, but private firms might. This should be a “concern” to the central banks, he added, as a “nation’s control of its currency is designed to protect people and get good outcomes”, while private firms are “more interested in selling products”.

Earlier this week Facebook’s Libra was mentioned once again, this time during a hearing of the Committee on the Digital Agenda in the German parliament. Benoit Coeure, ECB board member and chair of the Committee on Payments and Market Infrastructure, said that Facebook’s stablecoin could solve two major issues currently present in global payment systems.