from Hacker News

US $ Crypto Currency by Federal Reserve

by adam222 on 1/4/14, 2:52 PM with 24 comments

• by edward on 1/4/14, 4:55 PM

  Central banks operate provide real-time gross settlement (RTGS) systems. This allows transfers to settle in real time.

  See https://en.wikipedia.org/wiki/Real-time_gross_settlement

  Domestic banks have accounts with the central bank and can move money using RTGS. If the central banks allowed individuals and non-bank companies to open accounts then they could use the RTGS to transfer money instantly.

  There would be no blockchain, the central bank acts as a trusted third party. The central bank can see all transactions.

• by pyalot2 on 1/4/14, 3:29 PM

  There's a couple problems with that idea.

  1) It requires the US government to run the payment network. That's an expensive and security sensitive installation. The government, by far and large, isn't terribly good at running IT installations (see, the recent healthcare.gov)

  2) The governments like to exercise capital controls. They do that way of the banking system. If it introduced digital $, they can't control it. Because anybody with a wallet could receive and spend them, assuming that everybody can create a wallet.

  3) If not everybody can create wallet, i.e. the wallet needs to be governmental registration, it puts further demands on the features of the IT installation of the government. This isn't making it it any more likely to happen.

  4) The credit card and banking industry would feel themselves threatened. Because, a lot of what they do would be taken over by the government, there'd be no end of political flamewars and stalemates trying to get this trough.

  5) You're assuming that the government running the payment network would somehow, magically, be better than credit card companies. I very much doubt that, transaction fees would probably be even higher, and reliability would probably be pretty miserable.

• by vfclists on 1/4/14, 3:54 PM

  Is someone confused here? Isn't the dollar already the digital currency of the Federal Reserve and the international banking system? The dollar is a digital currency pretending to be a physical currency for the naive.

• by midnitewarrior on 1/4/14, 4:22 PM

  Well, I know you said this is "up for debate", but really, any form of digital currency issued by the Federal Reserve wouldn't be anything any consumer would want.

  The "Federal Reserve" is a federation of privately-owned banks authorized by the US Government as the banking monopoly that is permitted to issue its currency. The Federal Reserve is the bank that US government borrows from, and the private banks that issue the funds to the US Government make profit off of the loan. Excess profits (outside of legally stated limits) get returned to the tax payers. The saying goes -- there "Federal Reserve" is as "Federal" as "Federal Express (FedEx)".

  Understanding this, the banks that make up the Federal Reserve are the banks that issue credit cards and make money off of financial transfers. The Federal Reserve is not going to do anything to endanger the profits of its member banks. So while the Federal Reserve could create a crypto currency, assume it would be laden with an oppressive fee structure, issued and collected by its member banks. Every bank covered by the FDIC is a member bank / Federal Reserve.

  The only things consumers could get out of this is convenience. Banks are hungry for profits, so there would be fees, there would be advanced currency tracking (think FBI / NSA), there would be no privacy, there would be electronic fraud that may or may not be able to be reversed.

• by dobbsbob on 1/4/14, 4:30 PM

  Canada is testing this http://business.financialpost.com/2013/09/19/canadian-mint-p...

  One bonus of having gov digital currency is quick and easy transfers avoiding bank fees/delays and fraud of ach and wires. Another bonus is you can use Fedcoins in a decentralized p2p exchange to trade them for other coins.

• by salient on 1/4/14, 3:45 PM

  After the government trying to subvert crypto standards, what could possibly go wrong with this idea, that would force half the world to use this instead of the US dollar?

  Nobody would trust this. Bitcoin works because people trust it, because it's built on open source and P2P principles, so they trust it because it's "trustless". That's where most of its value comes from. People also trust the US dollar because it's been around for so long, and nobody even thinks about it anymore.

  So yes, the Fed Reserve could come out tomorrow and say that 1 FedCoin = $1, and dollars are gone from existence (unless you're suggesting FedCoin should compete with the dollar? But then what's the point?), all of them being replaced by trillions of FedCoins. And the next day FedCoin would drop in value by half, taking the US economy with it.

• by netman21 on 1/4/14, 4:30 PM

  I was thinking about this very idea. The Federal Reserve introduces a crypto currency that is centrally controlled and replaces the dollar (over time). Next, income taxes and State sales tax are eliminated and the revenue is replaced with a transaction fee. The beuatiful thing would be that this would give the Federal Reserve a real control over the economy. Things heating up? twist a knob and increase the transaction fee. Recession on the horizon? Twist it the other way and reduce the transaction fee. So, I looked into what transaction percentage would be required to replace current government receipts. Well, the US takes in $10 Trillion a year. Since GDP is only $15 Trillion the whole idea blows up. A 66% transaction fee just won't work. (I know that GDP is not the same as Total of All Transactions. Is it velocity x GDP?)

• by lucb1e on 1/4/14, 3:49 PM

  Any currency controlled by any one individual is either (1) used by only one individual, or (2) not a crypto currency.

  As for making the USD easier to use on the web, I think we call this system PayPal. Except it should be less evil.

• by Canada on 1/4/14, 5:54 PM

  Well, the Fed doesn't create interest free money so doing this would be quite a radical change in policy. But it's an interesting idea. The fed could create a new block chain and offer to buy any coins mined at a fixed rate. In this manner it could create digital cash that it wouldn't have to do much to manage. Just being there to guarantee liquidity would make that type of coin have value.

• by nly on 1/4/14, 6:02 PM

  if you want a centrally managed cryptocurrency and can tolerate deferring double spend detection (i.e. you have an overdraft and debt collection system) then there are better cryptocash solutions than bitcoin that don't require a block chain and provide untraceable transactions and complete anonymity. The only worthwhile innovation in bitcoin in fact is its use of a block chain to eliminate the possibility of monetary policy manipulation.

• by Spooky23 on 1/4/14, 5:19 PM

  The government doesn't want to make money transfer and settlement easier. Why do you think the highest denomination of currency is $100?

  We literally ship jumbo-jets full of $100 bills abroad so that foreign banks can maintain adequate reserves. If we cared about this, we'd print $10,000 bills. The system as it stands funnels movement of large amounts of money, which eases tax collection and other enforcement measures.

• by coderzach on 1/4/14, 3:09 PM

  If it's centrally controlled that defeats the purpose of it being a crypto currency.

• by dablweb on 1/4/14, 3:55 PM

  The very notion of a secure crypto-currency controlled by the Fed is an oxymoron.