Proponents say payments with a digital dollar would be faster and easier. Opponents say it would be costly and inefficient.
The nature of money is changing, and central banks around the world are debating whether they need to change with it.
As electronic payments take off and private cryptocurrencies such as bitcoin seek to gain traction, governments are exploring whether to issue digital versions of their national currencies that could be used as a universal form of payment in the way physical cash is today. These conversations gained urgency for some last year when Facebook Inc.announced plans to launch a cryptocurrency called libra, sparking concern that one of the world’s most powerful technology firms could become even more powerful by operating its own digital money.
So far, few countries have implemented a digital currency, though China reportedly is close and several countries have done or plan tests. Considering the dollar’s key role in global markets, should the U.S. commit to such a project?
Proponents say a digital dollar managed on a single network would facilitate faster, cheaper payments and protect the Fed’s ability to conduct monetary policy in a changing world. Opponents say Fed-controlled digital currency would be costlier and less efficient than many expect, and it would harm privacy by giving government the ability to track all dollar spending.
Neha Narula, the director of the Digital Currency Initiative at the Massachusetts Institute of Technology’s Media Lab, makes the case for digitizing the U.S. dollar. Lawrence H. White, a professor of economics at George Mason University and a senior fellow of the Cato Institute’s Center for Monetary and Financial Alternatives, argues against.
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