U.S. policymakers are so concerned about Facebook's plans to launch a new digital currency that they’re contemplating a novel response — having the Federal Reserve create a competitor.
Libra has forced the Fed to consider the issue because of a fear that private companies could establish their own currencies and take control over the global payments system. Some Fed officials share the concern about a new balkanized currency system outside government control that Facebook has threatened to unleash.
The growing pressure on the Fed is evidence of how rapid developments in technology are beginning to shake the foundations of the financial system, raising questions about whether policymakers are prepared. Some lawmakers want the Fed to take a more active role in fintech developments. “It is inevitable,” Federal Reserve Bank of Philadelphia President Patrick Harker said at a recent conference, according to Reuters. “I think it is better for us to start getting our hands around it.”
An array of powerful figures — Powell, President Donald Trump and House Financial Services ChairwomanOfficials took the threat so seriously because of Facebook's massive built-in user base. Trump immediately highlighted and dismissed concerns about it posing an existential threat to the dollar. "It is by far the most dominant currency anywhere in the World," he said of the greenback, "and it will always stay that way.
Carney is one of many officials around the world who have been suggesting that governments create their own competitors to Libra.
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