Pro Perspectives 10/1/21

September 30, 2021

The Fed was due to deliver a report on the viability of a central bank-backed digital currency (CBDC) in September.  It's October 1st, and no report.

So, Powell was asked about his thoughts on a digital dollar in his latest post-FOMC press conference.  He didn't take position either way, but said it would ultimately be a government-wide decision — i.e. the decision would lie with Congress.

We know that Congress has already held a hearing on the prospects of a digital dollar, back in June.  It was led by Elizabeth Warren. She's in favor (so is the administration).  So, it's safe to expect that the "government-wide decision" will be a "yes."  It's coming.  And Warren made it clear, in the hearing, that a central bank-backed digital dollar would "help drive out bogus digital private money (bitcoin, stablecoins, etc.)."

So, this has become maybe the existential threat to bitcoin. 

But today, the private crypto market got some encouraging news.  The BIS issued a report from a consortium of the top central banks in the world (including the Fed), that seemed to evaluate CBDCs in a world that coexisted with private cryptocurrency.  Bitcoin jumped 10% on the news.

We will see if the stand-alone Fed report, which is supposedly coming soon, is as friendly.  If so, the Democrat Congress that will be voting on the Fed Chair's renomination (in February) probably won't be too happy about it.  

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