The United States is seriously planning to issue FedCoin, a CBDC (Central Bank Digital Currency), following the lead of the Chinese government and others around the world. I have previously spelled out why we don’t need Fedcoin, basically because the currency of the United States is already largely digital. In this article I argue that not only don’t we need FedCoin, but that issuing such a CBDC has a strong potential for disaster. For a perspective that is broad and deep on this subject, see Oonagh McDonald’s recent book Cryptocurrencies: Money, Trust and Regulation.
The Eastern Caribbean Central Bank
Did you know that in 1983 eight countries in the eastern Caribbean banded together to create a central bank with a common currency? The ECCB resembles the Federal Reserve in the US for Anguilla, Antigua and Barbuda, Commonwealth of Dominica, Grenada, Montserrat, St Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines.
The ECCB’s experiment with a Digital Currency
After considerable planning, the ECCB kicked off a pilot for a digital currency in 2019. According to their website:
The Eastern Caribbean Central Bank (ECCB) launched its historic DXCDCaribe pilot, on 12 March 2019. ‘D’, representing digital, is prefixed to ‘XCD’ – the international currency code for the EC dollar.
The pilot involves a securely minted and issued digital version of the EC dollar – DCash. The objective of this pilot is to assess the potential efficiency and welfare gains that could be achieved: deeper financial inclusion, economic growth, resilience and competitiveness in the ECCU – from the introduction of a digital sovereign currency.
DCash will be issued by the ECCB, and distributed by licensed bank and non-bank financial institutions in the Eastern Caribbean Currency Union (ECCU). It will be used for financial transactions between consumers and merchants, people-to-people (P2P) transactions, all using smart devices.