Would a Digital Dollar be a Good or Bad Thing? — VAULT Cryptocurrency Blockchain News #46

VAULT.Investments
2 min readMar 20, 2022
Week of March 12th-19th

This week we saw president Biden sign his executive order to look into cryptocurrencies and what regulations might be needed for them. One aspect of this executive order was exploring the idea of a digital dollar. This has sparked a lot of discussion and controversy. Would a digital dollar be a good or bad thing for the average American?

What is a government issued digital currency? A digital currency issued by the United States would be a type of digital dollar. This would be issued and backed by the Federal Reserve much like the paper dollars and would be different than the current private crypto assets such as stablecoins.

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Advocates say a Fed digital dollar could make it faster and cheaper to move money around the financial system, bring into it people who lack bank accounts and provide an efficient way for the government to distribute financial aid.

Some advocates say such digital currency could help improve the effectiveness of monetary policy by allowing a central bank to change interest rates directly on accounts holding the government currency. This could allow central banks to bypass often fickle financial markets and bring monetary policy to the retail level.

Another motivating consideration: keeping up with other countries considering a digital currency for domestic and international payments. The U.S. may not want to see China, for example, creating a rival international financial network to the U.S. dollar via its digital currency.

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