China's digital yuan pushes key US lawmakers to seek urgency from the Fed on a digital dollar that fends off global rivals

·2 min read
Dollar vs. Yuan
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  • Rep. Maxine Waters has drafted legislation for the Fed to further study a digital dollar, according to the Wall Street Journal.

  • Other lawmakers have cited China's digital yuan as a reason to move quicker on a digital dollar.

  • Fed Chairman Jerome Powell said he nor the central bank is in no rush to issue a central bank digital currency.

A bipartisan group of US lawmakers wants the Federal Reserve to get more serious about issuing a digital dollar to compete with rivals like China's digital yuan.

Democrat Rep. Maxine Waters has drafted legislation that aims for the Fed to further study the prospect of a digital dollar and design a route for it to come to fruition, The Wall Street Journal reported.

It comes after Waters, who is chair of the House Financial Services Committee, called the area of central bank digital currencies "a new digital assets space race."

Another supporter of the digital-dollar effort, Republican Rep. French Hill, cited China's creation of a digital yuan in 2020 as a concern, noting Beijing's lending around the world could aid its adoption and threaten the dollar's dominance.

"We should be concerned about China's predatory practices," he told the Journal.

China hasn't ruled out a global role for its digital currency, named the e-CNY, but said it's mostly intended for small purchases by consumers.

The Fed is already reviewing the pros and cons of a digital currency. But Chairman Jerome Powell has said he's in no rush, while remaining steadfast that a digital dollar won't happen without the support of elected officials. Meanwhile, the Biden administration has ordered a study to review the ramifications of a digital dollar but has yet to take a stance on the issue.

Getting a digital dollar to market still faces obstacles from both the banking industry that says a digital currency would compete with their ability to take in deposits.

A digital dollar would be different than private assets like bitcoin and other popular cryptocurrencies in that the digital dollar would be backed by the central bank. A digital dollar has the potential to revamp the way consumers spend and transact outside of already established payment apps like Apple Pay.

Read the original article on Business Insider