The Federal Reserve is reportedly mulling over whether to launch a digital version of the U.S. dollar.
Within a few years, Americans are likely to have digital dollars accessible through smartphones. Free market advocates like Economist Peter Morici say it’s a good idea. Many Americans already get paid digitally through a direct deposit. He says a federally backed digital dollar would be better than cryptocurrencies like Bitcoin, which are not backed by any government.
“Basically, you’d have a digital account at the Federal Reserve. So instead of the Federal Reserve printing money, you’d access it electronically,” Morici said. “It would create a lot of efficiencies. It costs a lot of money to have a paper currency and checkbook-based system.”
However, Morici says Fed Chairman Jerome Powell appears to be dragging his feet when it comes to digital currency. Earlier this summer, reports indicated the Federal Reserve was considering creating a digital U.S. dollar.
“We’re still going to need some paper currency, let’s not fool ourselves,” Morici explained. “And you need someplace to get it. Also, people would need banks to make loans, and to borrow money and so forth, but banks would have to pay us a higher rate of interest in order to persuade us to keep our money there.”