Globalization of the Financial Role: Does America Want a Digital Dollar to Hold Dollar Hegemony?

The growth of digital dividends by global financial institutions can gradually transform the global payments landscape.

The United States is a world leader in digital payments and new technologies. However, it is not yet clear when and how the Fed will announce digital currencies, even after central banks in many countries have started to develop and produce digitally linked currencies.

On the morning of September 23, Beijing time, Fed Chairman Powell asked after the interest rate meeting if he was concerned about the Fed's collapse in central bank digital money production. . His response was, “The Fed is not lagging behind. In return, the Fed is in a good position to monitor and make decisions.

Compared to developed countries, many lawmakers in Europe and America have expressed concern and concern about the impact of digital advantages, but there does not appear to be any urgency.

Are you late?

The United States continues to lag behind in the development of digital advantages.

Whatever the final decision, Powell said the Fed will play a key role in setting global standards for digital banking services. According to the CBDC (Central Bank Digital Currency) World Index first published by PricewaterhouseCoopers, a global financial company, the United States ranks 18th in the world after Korea, China, the Bahamas and Ecuador. Eastern Caribbean Sea and Turkey.

New York University professor Ruri Roubini "predicted" that sooner or later the digital banking industry would be disrupted and financial security would suffer.

Roubini said the most important thing for the digital banking company is that it will destroy current economies. As a result, the new digital banking company will become the current financial manager, replacing all existing data, including long-term and short-term loans and loans, which can be obtained through digital rewards.

However, the Fed once maintained a negative attitude towards digital bank accounts. As 2020 dawns, the Fed's attitude towards digital bank banks has slowly changed. In January 2020, the Bank of International Debate (BIS), the European Central Bank, the Bank of England and the National Bank of Switzerland joined forces to form the Central Bank's Digital Currency Task Force Choice, Benefits and technological risks. Digital Federal Reserve, the Federal Reserve (Fed) will also join the next phase. But Powell has always recognized his point. In the United States, central bank digital currencies are "more important than ever."

The Biden administration tightened and opened up to digital benefits from the U.S. Federal Reserve in mid-2021. US Treasury Secretary Yellen made it clear in an interview with the New York Times that you need a better understanding of the Fed to learn more about digital currency. , and the digital currency announced by the Fed may bring "faster, safer and cheaper payment methods".

In February this year, President Powell spoke at a panel discussion at Home Services Assistance Group that when digital money is everything there are many concerns about the project, which could lead to security concerns. national and financial for the United States. In March, President Powell attended a video conference called “Global Central Bank Innovation in the Digital Age” hosted by the Bank for International Settlements. this project. "

In May of this year, President Powell said that the Fed, the central bank of the United States, had a responsibility to improve monetary and financial security and the payments function. Therefore, the Fed must be very careful in monitoring and adapting to new technologies in the payments, finance and banking markets. One of the prerequisites for a successful American business is that people must rely not only on dollars, but also on payment networks, banks, and other payment centers.

In 2019, the Fed promises to introduce FedNow services to provide banks with real-time or open payment terms each year. In a speech, Fed Vice Chairman Quarles also questioned the Fed about the need to announce a digital bank. He pointed out that the current payments in the United States are efficient, electronic and imperfect, but that they have been very good and are constantly improving.

Fitch analysts Monsur Hussain and Duncan Innes-Ker told the newspaper the Fed could further improve payments in the United States and reduce demand for digital banking services. As the Bank for International Settlements points out in its annual report, the potential risk of bank transaction disintermediation and network security risk are also important for decision-making when encountering central bank electronic money.

Can digital currency control the hegemony of the dollar?

The Fed has been cautious about whether and why the central bank will provide numerical advantages.

For a long time, the US dollar has been the most valuable currency and currency in the world. Some commentators believe confusion over the US attitude toward digital advantages has sparked global concern for the US dollar. However, there is also the perception that the Fed's dollar announcement could have a long-term regional impact and again reduce the global community's dependence on a strong currency.

"The dollar will stay put for a while," Harvard University marketer Kenneth Rogoff told Nikkei Asia. The main conflict in today's world of globalization and economics is the “dominant” US dollar. The disparity between hegemony and "weakness" of the American economy. Instead of using dollar hegemony, the United States is using the hands of the Fed to "sweep the fleece of growing global markets." The depression “and uncertain financial sanctions and fixed assets have led to great skepticism in the global economy, economy and financial system.

Rogoff cited this phenomenon for the “hegemony” of the US dollar and the return to the US anytime and anywhere US funds are used for settlement. What makes it difficult for midsize banks and commodity exchanges in many countries to compete with US commodity exchanges is whether they have restricted Fed funds. The transition to digital advantages will help restore the effectiveness of fiscal policy in an emergency by simplifying the use of negative interest rates. However, the post-epidemic world will grow rapidly at the expense of technology. The Fed cannot afford it.

HSBC global researcher James Pomeroy pointed out in the paper that the digital banking sector could change the role of midsize banks, but still depends heavily on the formation of midsize banks. Your design options may also change the interest rate. If intermediary banks were to report digital benefits directly, their responsibilities would change dramatically and individuals and businesses would be more directly involved with financial institutions. Most digital banking companies are now focused on home payments and have no financial impact, but the role of central banks will change when they do.

According to the International Monetary Fund's foreign exchange data, the percentage of US dollar reserves held by the central bank in the fourth quarter of 2020 was 59%, the lowest in 25 years. The IMF said this was in part due to competition from other currencies used by central banks in the global economy against the US dollar, and the role of the US dollar in international trade is diminishing.

On August 23, 2019, Carney, then Governor of the Bank of England, underlined in a speech that global economies are changing. The share of the United States in world GDP has fallen sharply. It may not continue to become a global economy and a transition to adoption. A "synthetic hegemonic digital currency" based on a basket of fiat currencies has become the global currency.

Zhong Hong, vice president of Research Company, and Peng Yazhe of the School of Finance at Renmin University of China, wrote the following article: Records the status of the US dollar as savings. If it is a global payments asset, the United States must actively promote the digital currency so that it can continue to be a global currency.

The threat of stability coins

In June 2019, Facebook announced Libra, a digital electronic device based on baskets of money, and released the first free copy of Libra, claiming to build a financial business that supports more than millions of people. In 2020, the Libra Party announced the second letter of its white paper and decided to ditch public channels and introduce a new stable currency pegged to fiat currency as a basket of old money. December of that year.

Zhong Hong and Peng Yaz wonder how to combat the impact that digital private money can have on fiat benefits and how to make the most of these opportunities. Digital funds can lead to the research and development of the Fed's central bank digital currency.

Powell also pointed out in his public statement that the new tools used by fixed funds can improve payments, speed up costs and lower costs for end users, but at the same time can be dangerous. For example, the value of a fixed coin is tied to the US dollar, but those coins are not protected by traditional payments such as banknotes, coins, or bank deposits. . Therefore, with the growth of stable spending, proper care and supervision must be taken seriously. Stablecoins are similar to financial instruments or bank deposits, but without rules. While there are now very strict regulatory procedures to oversee banks and mutual funds, stablecoins do not. "For Stabilitycoins to become an integral part of payments (crypto assets won't, and securities will), better regulation is needed, but not now."

However, Powell also said the potential of digital banking could increase, without change, liquidity and electricity in U.S. funds from private equity (e.g., a bank certificate). The Fed is now investing heavily in this project, hoping it will solve the problem of large electricity bills.

The Boston Federal Reserve is working with scientists from the Massachusetts Institute of Technology to develop and test the Federal Reserve's central bank digital currency. The main goal of this research and experimentation is to measure the safety and effectiveness of digital currencies in the Federal Reserve system, including the risk factors and the incredible skepticism that could result from digital banking transactions. Former Boston Fed Chairman Rosengren addressed the issue of how digital currency works, explaining that it is the responsibility of Apple Pay and Venmo (Paypal mobile payment platform). .

Benoit Coeure, director of the Innovation Center at the Bank for International Settlements, told the newspaper that the scenes and the voices are different for each country, and it is very old. It is also because different regions have different starting points and different payments. Second, in this case, the private sector has grown faster than the public sector in any country. This has many dangers.

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