tokenizing the Dollar in US
Rumours have been circulating that the United States Federal Reserve is planning to tokenize the Dollar following suit of other countries that have already been working on digitizing their currencies like China. The RMB-based digital currency has been in the works for a while now, and China has been very public in its support for blockchain technology and cryptocurrencies.
In contrast, the U.S. had shown no interest in tokenizing the Dollar. But as of recently, Morgan Creek Digital co-founder Anthony Pompliano has taken it to Twitter to state that plans are being made by the Federal Reserve to develop a digital dollar as will be announced this week.
Pompliano has also made it clear that it will be similar to the Chinese effort to digitize the Yuan, going on to add that whether the rumours hold true or not, the Federal Reserve should make efforts to tokenize their currency.
This is not the first time Pompliano has been public about his demand that the Fed needs to take the dollar digital. On an interview with CNBC’s Squawk Box, he argued that the country should tokenize the Dollar immediately if it wants to remain the world’s reserve currency.
Pompliano argued that if China were the first to have a digital currency, it would be more accessible than the U.S. Dollar and might end up displacing the Dollar as the world reserve currency. Therefore the Fed must make it an immediate priority to convert the Dollar into a digital token.
When asked in a counter-argument whether a digital dollar would make the existence of bitcoin redundant, Pompliano responded by saying that “….ultimately, people are going to opt for something that is not manipulatable, is not seizable, is not censorable…”.
This shows that existing cryptocurrencies like Bitcoin will still reign supreme. Nevertheless, from an economic standpoint, the tokenization of the Dollar will be necessary to maintain the global value of the currency.
This rumour also comes at an interesting time as the Federal Reserve Bank of New York publishes research which establishes that a single well-timed cyber attack on any major bank in the U.S. could cripple the financial system by damaging the credit flow channels between financial institutions.
It is estimated that an attack on any one of the five most largest U.S. banks will result in significant damages to other banks, with an average of about 38% of the financial network affected. This can also be another significant reason for the digitization of the U.S. Dollar since this will make the currency more accessible while maintaining the security and integrity of the U.S. financial system.