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Former Federal Reserve Governor Supports ‘FedCoin’ Project

//Former Federal Reserve Governor Supports ‘FedCoin’ Project

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Kevin Warsh, a former U.S. Federal Reserve governor, recently told The New York Times the Fed should give serious consideration to releasing a government-sponsored cryptocurrency — commonly called a “FedCoin.”

Warsh is among a group of investors in Basis, formerly Basecoin, a cryptocurrency designed with an algorithmic central bank that will keep the price stable.

Warsh was a Fed governor from 2006 to 2011 and was a leading contender to become its chairman last year.

Had he returned to the Fed, Warsh said he would have assigned a team to explore a “FedCoin.” He does not see such a coin replacing cash, but he views it as a way to conduct monetary policy when the next crisis occurs. He noted that most central banks believe cryptocurrency assets are prone to fraud and investor losses.

A distinguished visiting fellow at the Hoover Institution at Stanford, Warsh said blockchain technology would be helpful for enabling the transfer of trillions of dollars between banks.

The Bank of England and the Monetary Authority of Singapore are already exploring such a concept.

Fed Chairman Jerome Powell said in his November confirmation hearing that blockchain could have “significant applications in the wholesale payments part of the economy.”

A Peculiar Role For Crypto?

Cryptocurrency would make an unusual role for a central bank controlled currency, the New York Times article observed.

Since central banks largely focus on maintaining the stability of money’s value, cryptocurrency would be ill-suited as an exchange medium, given its volatility.

Central banks also focus on enabling law enforcement to contain crimes that cryptocurrencies are used for, such as money laundering, fraud, and tax evasion.

It would also be a twist if a technology supported by those who are motivated by distrust of central banks became a tool for those very banks.

The central banks considering blockchain technology do not share the more anarchist impulses of some cryptocurrency enthusiasts, the article noted. But Warsh argues that if people believe that digital currencies in some form are the future of money, the central banks should view them as more than a novelty.

Why He Supports The Concept

If the next generation of cryptocurrencies are more similar to money than to gold and would be a reliable unit of account versus being a speculative asset, Warsh said he would not want someone to take such a monopoly away from him.

If cryptocurrency enthusiasts are correct that the technology could provide a better way to conduct routine transactions, the central banks are the institutions with the most to lose.

Basis has already raised $133 million in a private placement. Backers besides Warsh include Bain Capital Ventures, GV, Stanley Druckenmiller, Lightspeed, Foundation Capital, Andreessen Horowitz, Wing VC, NFX, Valor Capital, Zhenfund, INBlockchain, Ceyuan Ventures, Sky9 Capital and others.

Basis’ goal is to marry the benefits of cryptocurrency with centrally controlled fiat currency. Central banks mitigate volatility via monetary policy. They expand and contract the money supply. Cryptocurrencies, by contrast, have a fixed supply, which fosters volatility that makes them an unreliable form of payment.

Basis brings the benefits of cryptocurrency without the volatility, said its chief executive, Nader Al-Naji. Basis would be distributed to those participating in the system, thereby decentralizing monetary expansion. Should it accomplish its goal, Basis will benefit the efficiency of developing nations’ economies, said Al-Naji.

2018-05-08T11:50:20+00:00 May 8th, 2018|Categories: Altcoins|Tags: , , , |

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