Whether private or public, the United States needs a digital dollar
The works of Silicon Valley Bank (SVB
You can have stable, unsecured banks if you want them. They are called “narrow banks” or “payment banks”. They are banks that hold customer deposits but don’t take those deposits and lend them to startups or gamble them on foreign exchange transactions or bet on horses with them or whatever bank risk managers will allow. They just hold your money and instead of paying you interest on it, you pay them fees to do useful things.
Now that may sound rather unappealing, but the truth is that very many people do not need all the facilities of a commercial bank account. They need a cheaper, faster and more transparent option to pay and get paid. Wallets, for example, that can send digital dollars to other wallets over the Internet, and do not come close to the banks or banking networks.
There are two fairly obvious ways to make a digital dollar happen. The first would be to create a Federal Narrow Bank charter for fintechs, similar to a European payment institution license, which would allow someone like Walmart
Note the business implications. As Professor Larry White (author of the new book Better Money: Gold, Fiat or Bitcoin
But then, you might ask, if you as a consumer don’t get any interest on dollar tokens, just like you don’t get any interest on dollar bills, why bother with the private token intermediaries at all? That brings us to the second option. Why not just let the Federal Reserve issue a digital dollar itself? For most people, in most of the world, most of the time, a FedCoin (a US digital dollar token redeemable at the Fed at any time) is the ultimate stablecoin.
This is about more than convenience and cost savings for American consumers. As Sam Lyman pointed out, properly regulated stablecoins have the potential to “cement US financial hegemony” for a generation. When Eswar Prasad made the prediction that “national currencies issued by their central banks … could be supplanted by stablecoins” he was right. If stablecoins really become the “run-on to the dollar economy” for billions of people around the world , it will mean that the US can exercise strategic power far beyond its capabilities today.