The United States Federal Reserve, which is the Central Bank of the USA and one of the most powerful organizations in the world, has revealed that they are experimenting with a blockchain-based digital dollar, also known as a central bank digital currency (CBDC).
Federal Reserve Chairman Jerome Powell indicates that while the organization is not currently developing a CBDC, it is conducting small-scale experiments with blockchain technology to gain hands-on experience, to better understand the opportunities and limitations of a CBDC in the United States. Also, the legal concerns surrounding a potential digital dollar are being explored, including monetary and payment policies, financial stability, supervision and operational issues, and vulnerability to hacking.
One of the main legal questions is the degree of anonymity that users would be allowed to have, while simultaneously maintaining anti-money laundering (AML) standards.
The news of the Federal Reserve experimenting with blockchain technology is simultaneous with China’s persistent announcements that a digital Yuan (CNY) is coming soon. Some lawmakers in the United States are fearful that they will miss out on an opportunity to revolutionize the world financial system, and that the USD could lose its global reserve currency status if China launches their CBDC and the Federal Reserve does nothing.
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