Governments can benefit tremendously from removing the need for cash and relying on a virtual currency instead. For the end consumer, such a situation is far from ideal, for obvious reasons. Although many assumed the concept of a FedCoin to be dead and buried, the reality is very different. US Policymakers are eager to revisit this topic and launch such a currency prior to Facebook pulling off their little stunt.
FedCoin Isn’t Dead
Over the past few years, the discussions regarding FedCoin have all but died out. Several years ago, the US government showed a keen interest in creating a virtual currency which would not only rival Bitcoin, but also replace traditional cash. Various countries around the world have begun their own initiatives to erode the reliance on cash slowly but surely. Most of these “forced” ventures have had the opposite effect, creating a lot of dismay in the region in question.
Despite these obvious setbacks around the world, it would appear the US policymakers are not giving up on their idea. If the Federal Reserve issues its own virtual currency, the future would certainly look very different. At the same time, the institution knows there will be many potential challenges that need to be overcome in a swift and decisive manner. That is easier said than done, as the outside world still considers FedCoin to be ludicrous and an outlandish idea. It can even become a threat to financial sovereignty.
Libra Applies the Pressure
In a way, it would be an interesting situation if a technology giant like Facebook issues its own virtual currency before the Fed can. Despite the rather poor and often negative response to the Libra project – including the departure of several founding members in recent weeks – the venture is still alive and kicking. So much even that US policymakers have decided now is the time to issue a FedCoin and remain ahead of the competition.
One also has to keep in mind that Facebook faces a lot of regulatory pressure regarding Libra. It is unclear if this is simply done to ensure FedCoin could launch ahead of this virtual currency. One cannot ignore the risks associated with technology giants introducing their own virtual currency, as such developments pose legitimate economic threats. The United States is also aware of how other countries aim to create their native digital currencies. A lot can be learned from those efforts, although no one wants to be left behind either.
What Comes Next?
It is virtually impossible to determine how this situation could play out in the months to come. Creating FedCoin is the easy part, but ensuring it is viable to use in everyday life – and potentially displace cash altogether – is something else entirely. Ensuring compatibility will pose a growing set of challenges and problems along the way. For the time being, it seems the discussions regarding this new virtual currency are kept vague on purpose. The overall enthusiasm associated with FedCoin has also died down a fair bit in the past few years.