The US Congress Monetary and Trade Policy Subcommittee discussed important issues on digital currencies at a hearing last Wednesday, July 18. The audience, titled "The Future of Money: Digital Currency", considered potential domestic and global implementations of crypto-coins.
At the hearing, the subcommittee discussed the deployment of crypto-coins and digital assets and their underlying technology, blockchain, by central banks and discussed whether traditional central banks should support the idea of a "central digital currency bank" ( CBDC, in acronym in English).
Rodney Garratt, a professor of economics at the University of California, Santa Barbara, said that banks need to decide whether they want to completely withdraw money from the public or whether they choose to adopt one of the types of digital alternative. Which, in turn, could be "some form of criptomoeda".
Already, Alex Pollock, a senior fellow at the R Street Institute (a nonprofit organization that defends the free market, efficiency and least government interference in the economy), argued that "having a CBDC is one of the worst financial is something conceivable. " Pollock said a CBDC would only increase the size, role, and power of central banks, adding by way of example that the creation of a CBDC by the Federal Reserve, the US central bank, would make it the " the largest credit allocator of the US economic and financial system. " He went on:
"I THINK WE CAN SATISFY THAT SUCH CREDIT ALLOCATION WILL BE INEVITABLY POLITIZED, AND THAT CONTRIBUTORS WOULD BE ON THE LIMIT OF YOUR CREDIT LOSSES. RISK WILL RE-DIRECT THE CENTRAL BANK. "
Pollock explained that if the fiduciary currency is scanned, its nature will not be changed and it will still be issued by a central bank. While Pollock can imagine some kind of privately backed private digital currency, he concluded that it would not be a "private fiat currency" such as Bitcoin.
When subcommittee chairman Andy Barr asked whether the crypto-coins could function as a substitute for fiduciary currencies, Garratt said that "in terms of a conceptual idea," they are "to some extent" but they are not "good solutions to this ", at the time. Garratt argued that Crypto-Coins do not operate effectively as means of exchange because of their price volatility. The professor also suggested that volatility may begin to decline as the rate of adoption of crypto-coins rises, claiming that "people need to start using them in everyday transactions, just like traditional money."
Subcommittee vice president Roger Williams asked what are the main impediments to the adoption of crypto-coins and blockchain and what the US Congress can do about them. Norbert Michel, director of the Heritage Foundation's Data Analysis Center, cited the capital gains tax (CGT) as the biggest impediment due to the complex tracking process of tracking gains and losses.
Michel also noted the importance of a prudent and friendly regulatory approach, which means that financial regulators should not enforce strict regulations on the market only with the justification that crypto-coins can be an instrument for illegal activities such as money laundering.
