Is the digital dollar the new American virtual currency?
Find out what is already known about the digital dollar
Announcements
Have you ever imagined a digital dollar? Well, Joe Biden, the current president of the United States, has.
In fact, he has already ordered the Treasury Department to study the creation of a digital dollar, a move that could change the way money is used not only in the United States, but around the world.
Due to the importance of this subject, in today's article, we will talk more about the digital dollar and its possible impacts.
Read on to find out more.
How would the digital dollar work?
The creation of the digital dollar, as you already know, is still in the study phase.
This means that there are several undefined things, such as the recording of operations.
Cryptocurrencies use the blockchain process to record all transactions. However, the Electronic Currency And Secure Hardware Act (ECASH Act) does not seem to like the idea of using this technology to provide for transfers without the validation of a common ledger.
That is, on the contrary of Bitcoin, the tendency, in this case, is for the process not to be completely decentralized.
This way, it will be possible to have greater control over operations.
The digital dollar could be kept on a smartphone or in a virtual wallet.
The problem is that if the user loses access to the token, they may lose access to the money. For this reason, there is still a lot to analyze and study.
Does creation depend on coin performance?
President Joe Biden's authorization to conduct a study on the digital dollar is not enough.
After all, there is still no guarantee that the American currency will actually be able to leave the paper and enter the digital world.
It is necessary to evaluate the role that cryptocurrencies will play in the future.
Project to create the digital dollar
In March 2022, US President Joe Biden launched a project to create a digital dollar.
However, he is aware of the risks involved in this innovation.
He asked the Treasury Department to submit a report on the future of the currency, detailing the main advantages and disadvantages of creating a central bank-issued digital currency.
Joe Biden wants all the details possible about the consequences of this idea in relation to financial and payment systems, economic growth and, above all, the country's security.
Furthermore, he asked the FED to study all the necessary steps for the possible launch of the digital dollar.
The reason for this was the great advancement of digital currencies and the growing use of virtual payment systems.
What would be the impact of the electronic dollar in Brazil?
The purpose of creating the digital dollar is to maintain the currency's dominance in the global financial system.
In other words, the idea is to get people to start using the dollar instead of Bitcoin or other cryptocurrencies.
However, due to the uncertainties in the North American markets, it is not yet possible to know exactly what the impacts of this will be on the Brazilian economy. However, it is already possible to think about some possibilities.
The first of these is the ease of buying and selling dollars. After all, electronic transactions make this process much easier, as they allow people to buy dollars or any other currency internationally.
In other words, this will bring certain facilities to Brazilians who want to travel abroad.
Furthermore, if Brazil conducts more negotiations abroad, there may be positive impacts on the country's economy.
What are the potential benefits and risks?
A CBDC (Central Bank Digital Currency) can bring more convenience, security and savings to consumers.
It is also more efficient for collecting taxes or distributing government funds.
Even with the benefits, you can't ignore the risks.
After all, there are technological barriers and a certain concern with factors such as security and privacy.
In fact, the FED has already warned about possible cybersecurity risks.
Another issue that could threaten the FED's independence is the political issue.
According to David Yermack, chairman of the finance department at New York University's Stern School of Business, the risk of political abuse is high.
“If you give the central bank that kind of power, the policy safeguards would probably need to be much higher than what is currently in place for the Federal Reserve,” Yermack said.
Source: CNN Brazil
What form would the digital dollar take?
The digital dollar would be issued by the Federal Reserve System, as would all notes and coins used in the US.
However, this digital format would be more accessible to everyone, not just financial institutions.
But unlike money deposited or spent through apps like Paypal, for example, it would be recorded in Federal Reserve accounts.
Why is the dollar falling?
In recent weeks, after two years of constant increases, the dollar has begun to fall.
In 2022, the dollar has accumulated a drop of 13.11% against the Brazilian currency.
This caused great surprises, especially since there is a war going on in the middle of Europe.
But despite this scenario causing even more risk aversion, which would be bad for Brazil, it is important to remember that this war involves two major commodity producers – Russia and Ukraine.
Due to the decrease in production in these countries, other nations begin to buy products from other nations that are not at war. And Brazil is a major exporter.
But how far will this devaluation go? According to experts, the dollar could fall even further in the short term.
However, the ongoing tension between Russia and Ukraine, the rise in interest rates in the US and the uncertain scenario in Brazil, mainly due to the elections, could cause the currency to rise again and end 2022 above R$5.
Conclusion
The digital dollar is a possibility. However, there is still a lot to evaluate.
Joe Biden has requested analyses of systemic risk and protection. He also wants studies to be carried out on correcting inefficiencies in the payment model.
