The development of a digital version of the U.S. dollar must entail many facets, and the best way to start would be through a series of pilot programs that examine specific applications. That’s what former Commodity Futures Trading Commission chair J. Christopher Giancarlo told the Senate banking committee’s subcommittee on economic policy in a hearing today.
Giancarlo, who has emerged as a leading advocate for the “digital dollar” since his term at the CFTC ended in April 2019, testified at a hearing focused on economic competition between the U.S. and China.
China is widely expected to be the first major economy to issue a sovereign digital currency as early as this year, a prospect that some national security experts have suggested could pose a threat to the U.S. dollar’s dominance over the global financial system. But the question of whether the U.S. needs to follow suit is not only a geopolitical one, according to Giancarlo.
As he has before, Giancarlo stressed that policymakers should view the dollar as a technology in itself. “How do we enhance its technological capability in the world?” he asked. “This is what China is experimenting with today in their own currency, to make it technologically superior by making it digital, tokenizable, fractionalizable, and programmable.”
America needs to start experimenting too, Giancarlo said. Earlier this month, during a hearing of the full banking committee, he proposed that the Department of Treasury start conducting pilots. This time, when pressed by economic policy subcommittee chair Tom Cotton, he got a bit more specific.
First, he said, to “future-proof” the dollar, the U.S. has to approach a potential technological upgrade in “the same way we explored space, with a series of deliberate pilot programs with each one building on the one before.” Giancarlo said the pilots should focus on issues such as privacy, financial inclusion, areas that are “underserved by banks,” wholesale payments, and international payments. “There are so many elements of this,” he said.
He went further: “We could do discrete programs in, say, one Fed regional area that’s focused on rural issues. We could do another one in another area focused on inner city issues. We could do another on global remittances.”
“There’s so much that we need to look at,” said Giancarlo. “We could gather that information on that and build something that would be durable and long-lasting.”
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