The Digital Dollar: Here It Comes

The United States needs to move along with the creation of a digital dollar.

The future of money is digital.

The United States needs to be a leader in the development of the digital world.

The Chinese have moved.

They have banned cryptocurrencies and are concentrating on the development of the e-CNY, the e-Yuan.

I think that the Chinese have gotten it right.

Cryptocurrencies, as they have developed, are not a medium of exchange.

They are, according to Gary Gensler, leader of the Securities and Exchange Commission, securities.

They are not a medium of exchange, that function has never really worked out for them.

They are a store of value, at best. But, not a medium of exchange.

That is why Mr. Gensler believes that the SEC should be the regulator of cryptocurrencies.

China recognizes this.

China is developing the e-CNY, a medium of exchange.

It will be the foundation of China’s payments system, and if China gets its way, it will become the primary reserve currency of the world and rule the world’s payments system.

As Kevin Warsh, a former member of the Federal Reserve Board writes in the Wall Street Journal:

“Don’t be deceived by the thousands of private cryptocurrencies masquerading as money in some form of circulation.”

“These schemes are fraudulent, and most are worthless.”

China recognizes this.

Mr. Gensler recognizes this.

I attempted to give some background for this argument in my recent post.

But, the United States seems to be dragging its feet in moving, like China, to a digital currency.

Mr. Warsh further argues:

“The new digital dollar would strengthen the currency for a new era, and bolster America as leader of the global economic system.”

If not, the result… America loses out.

In the words of Mr. Warsh:

“If a new bipolar world emerges–by some imprudent mix of Chinese force and American fatigue–the dollar’s dominant role could be undermined.”

“Decoupling the world’s two largest economies wouldn’t be limited to imports and investment, munitions and might.”

“It could well include the rise of a powerful alternative reserve currency.”

The United States Must Move

The bottom line of this case is that the United States must move.

The United States must get its act in order and move toward the leadership of the digital world.

The world, if it is to move into the really prosperous environment that is on the horizon, must have a stable, efficient, and effective digital currency to work with.

Mr. Warsh writes,

“The U.S. and its allies need sound and stable money to escape a period of weak output, high inflation and geopolitical conflict.”

“A digital dollar baked by America’s full faith and credit would be an important part of a reformed financial and monetary architecture.”

And, now is the time to make the move!

The Timing Couldn’t Be Better

There are two major reasons why the timing could not be better for the United States to make such a move.

First, the U.S. dollar is quite strong in today’s market. Being around parity with the Euro gives it a very crucial leadership opportunity because of its position among the major world currencies.

I have written about how I believe that the Federal Reserve has, over the past couple of years, acted in a way that the value of the U.S. dollar would rise, especially against the value of the Yuan.

The Federal Reserve, in my mind, has been very successful in gaining the current position for the U.S. dollar.

Second, the bankruptcy of FTX could not have been more timely.

There has been a tremendous pressure against the Fed and against the U.S. government to hold back on any efforts they might want to make to regulate the world of cryptocurrencies and the digital world.

Mr. Gensler has operated so far by applying existing “securities” laws and regulations to the cryptocurrency world.

Many believe that he needs to go farther.

Mr. Gensler replies that this is all he has to work with, and since he is dealing with “securities,” he can apply the rules and regulations for securities in the crypto-world.

“FTX’s collapse has unleashed a new level of scrutiny.”

Now, Mr. Gensler and the SEC have a more supportive audience to enlarge its efforts and bring even more to bear on this sector of the world.

The evolution of digital products and services will now face the reality of the market-place.

FTX has given the SEC the opportunity to move…and, to move fast.

A Digital World

As I have written many times, the world is going to become digital.

I have no question about this outcome. But, we are dealing in the world of radical uncertainty.

We do not know what this “digital” world is going to look like.

But, we are now moving more rapidly toward the future.

Central banks will be involved. Regulators will be involved. Agencies will be involved.

The reality of the world is that money and finance is going to be overseen and controlled in one way or another.

My preference is for less regulation and control, than more.

But, we need to accept the fact that we need to regulate and oversee the “money world” and then minimize the role of the regulators and overseers.

In this, we do need to follow China.

If we don’t act this way, if we try to avoid all regulation, then manipulators and others take over, which will cause the regulation to be harsher and less productive.

Hail, to the digital world! Hail, to the regulated digital world!