Ex-Governor of the U.S Federal Reserve Supports a State-Owned Cryptocurrency ‘FedCoin’

According to the latest reports from New York Times, ex-governor of the U.S Federal Reserve - Kevin Warsh - has said that the agency should give a serious thought about having its own state-owned cryptocurrency ‘FedCoin’ sponsored by the government.

Warsh was the governor of Fed for the period of 2006 to 2011 and also the leading contender for the post of chairman, last year. Had Warsh got an opportunity to return to the Federal Reserve, he would have set up a task force in exploring the options of having a “FedCoin”.

Warsh’s idea of having a state-owned cryptocurrency is not the replacement of cash but rather looking it in a way to conduct monetary policy during the time of the next crisis. Warsh was all praises for the decentralized blockchain technology which allows for reliable and accurate record keeping of all the transactions, and thus would have facilitated trillions of dollars worth transactions between the banks.

Warsh said: “It strikes me that a central bank digital currency might have a role to play there.”

The Monetary Authority of Singapore and the Bank of England have already started exploring the options for such use. Last year in November, Fed chairman Jerome Powell shared a similar thought to that of Warsh.

Powell said: “We actually look at blockchain as something that may have significant applications in the wholesale payments part of the economy. Not that it would supplant and replace cash, but it would be a pretty effective way when the next crisis happens for us to maybe conduct monetary policy.”

Although the global banking and financial institutions have always opposed to having cryptocurrencies, the arrival of FedCoin could at least solve one problem which is to control the extreme volatility of digital currencies which they currently exhibit. Institutions like the Federal Reserve have been working over the years and know how to maintain stability in the value of a currency.

Moreover, FedCoin would also other worries of the existing use of digital currencies for illicit activities of tax evasion and money laundering. Warsh said: “Congress gave the Fed a monopoly over money. And if the next generation of cryptocurrencies look more like money and less like gold — and have less volatility associated with them so they would be not just a speculative asset but could be a reliable unit of account — as a purely defensive matter I wouldn’t want somebody to take that monopoly from me.”