Tuesday, 14 July, 2020

Fed Digital Dollars Are Part of Debate Over Coronavirus Stimulus

Federal Reserve Chair Jerome Powell pauses during a news conference in Washington. The Federal Reserve says it will buy short-term loans from banks and companies to support the flow of credit as the economy grinds House Dem proposes digital ID and state ledger-backed currency for stimulus aid to U.S. consumers
Ginger Lawrence | 26 March, 2020, 23:28

Millions of Americans who need funds the most right now are also unbanked, meaning a check in the mail will come will come with its own challenges.

House Democrats scrubbed any mention of a digital dollar from the coronavirus relief bill Tuesday morning. "That bill, the "Financial Protections and Assistance for America's Consumers, States, Businesses, and Vulnerable Populations Act, ' would empower the Federal Reserve - the central banking system in the US - to put money into Americans" hands quickly with a new Fed-backed digital dollar system".

Additionally, it also defined a digital dollar wallet as a "digital wallet or account, maintained by Federal reserve bank on behalf of any person, that represents holdings in an electronic device or service that is used to store digital dollars that may tied to a digital or physical identity". Pelosi said House Democrats will introduce their version of the stimulus package to respond to the coronavirus, offering an alternative to the bill now under discussion in the Senate. This can also pave the way for the USA central bank to establish its digital currency, which can be set in action once the pandemic comes to a halt. However, it is still not guaranteed that the digital dollar will make it into the final bill. Member banks include those banks that are members of the Federal Reserve and regulated by the Fed.

South Korea will temporarily ease foreign exchange liquidity rules and start injecting dollars next week from the $60 billion currency swap line with the U.S.to lessen the strain in dollar funding and weakening of the Korean won amid the coronavirus pandemic.

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"Large Federal Reserve banks and other financial institutions (must) provide digital wallets to individuals and common taxpayers that are eligible for direct government emergency payments that are now being negotiated under the historic economic aid package".

Fed member banks are expected to have a "pass-through digital dollar wallet" for every individual that is qualified for the stimulus package. However, the widescale implementation of Central Bank digital currency (CBDC) will take time and careful coordination between the government and private sector stakeholders.

The bills note that the payments could, "otherwise" be made by check.