The Federal Reserve’s forthcoming digital U.S. Dollar, also known as a Central Bank Digital Currency (“CBDC”) will position the Federal Reserve as one of the world’s largest FinTech companies. It also means less privacy for consumers and more competition for traditional banks and fintech companies.
Central Bank Digital Currencies such as China’s digital Yuan and the forthcoming Federal Reserve-issued digital U.S. Dollar will enable Central Banks to engage consumers directly, circumventing commercial banks. With its digital U.S. Dollar The Fed will have real-time insight into consumer spending. Consumers therefore will have significantly less privacy as it relates to their day-to-day lives and spending habits. How easy it will be for the U.S. Treasury and The Federal Reserve to coordinate future economic “stimulus” programs. The entire process will leverage straight through processing (“STP”), circumventing J.P. Morgan, Wells Fargo, Bank of America, Square, PayPal, Intuit, Fiserv, FIS and other traditional intermediaries. Good for the Fed, bad for traditional banks and FinTech companies.
In addition, the Fed’s digital U.S. Dollar will further crowd out de novo bank activity and FinTech startups. The Fed has already done untold damage to the U.S. Banking sector with its persistent low interest rate policy (read more HERE) – a key driver of the bank M&A activity in recent decades.
Finally, imagine the level of spending-related data the Federal Reserve will have at its disposal post-rollout of the digital U.S. Dollar. That metadata will be folded into the metadata collected by the NSA, the IRS and so on, rivaling China in terms of data collection on its citizenry. The Fed will soon be one of the world’s largest FinTech companies.