US Congressmen Ask Fed to Consider Developing 'National Digital Currency'

Two U.S. lawmakers want the Federal Reserve to consider creating a digital dollar.

In a letter sent to Federal Reserve Chairman Jerome Powell, Rep. French Hill and Rep. Bill Foster outline concerns they have about risks to the U.S. dollar if another country or private company creates a widely used cryptocurrency, and ask whether the central bank is looking into creating its own version.

First reported by Bloomberg Law, the letter details how the Fed has the right to create and manage U.S. currency policy.

"We are concerned that the primacy of the U.S. Dollar could be in long-term jeopardy from wide adoption of digital fiat currencies. Internationally, the Bank for International Settlements conducted a study that found that over 40 countries around the world have currently developed or are looking into developing a digital currency."

Most notably, Bank of England governor Mark Carney suggested that a digital currency backed by a basket of other financial instruments might help nations make this shift.

The U.S. should not rely on private companies to develop digital currencies, they wrote.

"The Facebook/Libra proposal, if implemented," the congressmen wrote, "Could remove important aspects of financial governance outside of U.S. jurisdiction."

The letter asks a number of questions, including whether the Fed is currently looking into developing a digital currency, whether there are any contingency plans if digital fiat currencies gain traction, what legal, regulatory or national security issues might prevent the Fed from developing a digital currency, what market risks or other issues might result from a Fed cryptocurrency and what benefits there might be to the project.

Last year, former Federal Deposit Insurance Corporation Chair Sheila Bair also recommended the Fed look into creating a digital currency as a way of avoiding being disrupted by the private sector or another nation.

"With the potential for digital currencies to further take on the characteristics and utility of paper money, it may become increasingly imperative that the Federal Reserve take up the project of developing a U.S. dollar digital currency."