UPDATE (Oct. 4, 2019, 20:50 UTC): A spokesperson for the Federal Reserve told CoinDesk, "We have received the letter and plan to respond."
Two U.S. lawmakers want the Federal Reserve to consider creating a digital dollar.
, Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) outline concerns they have about risks to the U.S. dollar if another country or private company creates a widely used cryptocurrency, and ask whether the central bank is looking into creating its own version.
, the letter details how the Fed has the right to create and manage U.S. currency policy.
"The Federal Reserve, as the central bank of the United States, has the ability and the natural role to develop a national digital currency," the Congressmen wrote, adding:
Indeed, there have been some calls for the global financial system to move away from the dollar. Most notably, Bank of England governor Mark Carney suggested that a digital currency backed by a basket of other financial instruments might help nations make this shift.
In Monday's letter, Foster and Hill wrote that cryptocurrencies are currently used for speculative purposes in the U.S., but their use may "increasingly align with that of paper money in the future."
The U.S. should not rely on private companies to develop digital currencies, they wrote. The letter specifically mentions the Facebook-led Libra stablecoin.
"The Facebook/Libra proposal, if implemented," the congressmen wrote, "could remove important aspects of financial governance outside of U.S. jurisdiction."
The letter asks a number of questions, including whether the Fed is currently looking into developing a digital currency, whether there are any contingency plans if digital fiat currencies gain traction, what legal, regulatory or national security issues might prevent the Fed from developing a digital currency, what market risks or other issues might result from a Fed cryptocurrency and what benefits there might be to the project.
Hill and Foster are not the only individuals to suggest that the Fed might benefit from creating its own cryptocurrency. Last year, former Federal Deposit Insurance Corporation Chair Sheila Bair also recommended the Fed look into creating a digital currency as a way of avoiding being disrupted by the private sector or another nation.
The Federal Reserve is also looking to create a real-time payments system, though it is unclear whether there will be a cryptocurrency-like aspect to it.
In the letter, the Congressmen suggest that it might even be an urgent matter for the Fed, writing:
A message left with the Federal Reserve's press office was not immediately returned.
Update (Oct. 3, 16:52 UTC): Following the publication of this article, a spokesperson for Hill told CoinDesk that the Congressman does not have a position on the Fed creating a digital currency, and considers the correspondence "more of a fact finding letter."
Federal Reserve Chairman Jerome Powell image via Federal Reserve / Flickr
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.