With an eye to stimulating the economy with direct cash injections and bank the unbanked, bills were proposed by democrats and Senate to allow individuals to hold checking accounts directly with Federal Reserve Banks and such account were referred to as ‘’digital dollars.’’ A bipartisan group of U.S. congressmen urged Treasury Secretary Steven Mnuchin to consider the use of blockchain technology in nurturing the federal government’s coronavirus response.
Nowadays, private banks work as middlemen between depositors and government in terms of fees. But in that activity some people can’t participate as they don’t have sufficient savings. Hence in this situation a digital dollar system can play a vital role allowing the government to subsidize the unbanked. The system also can directly target countercyclical monetary stimulus and legislate non-discretionary monetary rules.
The plan helps directly target cash injections as the middlemen are eradicated. As a result of the system, a chaos descends down to the government printing press from any reserve requirements affecting negative interest rates maybe.
FDIC will insure digital dollar accounts which is true but this would be a quite limited consolation to Americans facing the shadow of hyperinflation on the off chance such kind of insurance was ever needed. Being private banks is impossible without the liquidity of Fed. The fact appears that people will lose confidence in the Fed instead of individual banks if that scenario is seen in economy indeed.
The United States was crafted with federalism with both principled and practical skepticism. In this federalism system, banks have been attempting to take them to higher positions than others by providing services service. So, in this long-lasting and evergreen system, if a natural bank with virtually limitless power and resources appears, it will create a great obstacle to the free market and it will enhance the opportunity to autocrats. The system seems raunchy but the system is capable of reacting to the fatality of viruses in a manner that efficiently apportions society’s unavailable resources. But everyone one is greedy of powers so both Republicans and Democrats will want to legislate their own views of the digital dollar.