In the world of cryptocurrencies, Bitcoin is the leading token in terms of circulation, but this has a lot to do with being the most valuable digital asset, which means that most transactions are related to speculative trading and investing. Ripple, a centralized digital currency that trades under the symbol XRP, gets more circulation than BTC, but mostly in the remittances and international money transfer arenas.
There are two emerging cryptocurrencies making a circulation splash, and they share one factor in common: their value is tied to the United States dollar. Tether (USDT) and U.S. Coin (USDC) are known as “stablecoins” which means that their currency exchange value will always be the same as the American dollar because this is the business plan of their respective development teams. In the case of USDC, which is backed by investment banking giant Goldman Sachs, its market capitalization has increased considerably this year because users of this digital currency enjoy its stability and trust in Goldman Sachs as the manager of the underlying blockchain.
With the profile of stablecoins rising, it stands to reason that the U.S. Treasury could soon develop a digital version of the greenback, but this is not likely to happen as long as Chairman Jerome Powell leads the Federal Reserve Bank. Powell recently sent a letter to Congress for the purpose of answering questions related to cryptocurrency use, and it was clear that Powell does envision a sovereign blockchain for the USD.
It should be noted that the Russian central bank has already developed a digital version of the ruble, and a similar approach has been taken with the Singapore dollar. As of October 2019, the Eastern Caribbean Dollar was undergoing a digital pilot program to test if going cashless is in the future of various island nations. These three digital currency projects are based on the open-source Ethereum blockchain, and they are being monitored by American financial regulators, but there does not seem to be an interest in emulating projects.
Powell’s letter to Congress included his opinion of the American banking and payments systems, which he thinks are advanced, secure, dynamic, inexpensive, and robust; this opinion was clearly meant to underscore why the Fed Reserve Chairman does not think a crypto-greenback is needed, but those who work in the U.S. payments industry know that this is not the case. Asia and Europe are the leading markets in the digital payments arena, and a major reason why the American market lags behind is because of inflexible financial and banking regulation. Refraining from testing the waters of digital currencies will only make the U.S. less competitive in the global payments arena.