The travails of Silicon Valley Bank (SVB
VB
Stable Banks
You can have stable, non-dodgy banks if you want them. They are called “narrow banks” or “payment banks”. They are banks that hold customer deposits but do not take those deposits and lend them to startups or gamble them on foreign exchange transactions or bet on horses with them or whatever else it is that bank risk officers will allow. They just hold your money and instead of paying you interest on it, you pay them fees for doing useful things.
Now, that may sound rather unappealing, but the truth is that a great many people do not need all the facilities of a commercial bank account. They need cheaper, quicker and more transparent options for paying and getting paid. Wallets, for example, that can send digital dollars to other wallets over the Internet, not going anywhere near the banks or banking networks.
There are two rather obvious ways to make a digital dollar happen. The first would be to create a Federal Narrow Bank charter for fintechs, similar to a European Payment Institution licence, that would allow someone like Walmart
WMT
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Note the business implications. As Professor Larry White (author of the new book Better Money: Gold, Fiat, or Bitcoin
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But then, you might ask, if as a consumer you are not getting any interest on your dollar tokens, just as you are not getting any interest on your dollar bills, why bother with the private token intermediaries at all? That brings us to the second option. Why not just have the Federal Reserve issue a digital dollar itself? For most people, in most of the world, most of the time, a FedCoin (a US digital dollar token that can be redeemed at the Fed at any time) is the ultimate stablecoin.
Digital Power
This is about more than convenience and cost-saving for U.S. consumers. As Sam Lyman pointed out, properly regulated stablecoins have the potential to “cement U.S. financial hegemony” for a generation. When Eswar Prasad made the prediction that “national currencies issued by their central banks…could be displaced by stablecoins” he was right. If stablecoins do indeed become the “onramp to the dollar economy” for billions of people all around the world, then that would mean the U.S. could exert strategic power well beyond its abilities today.
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