Oct 17, 2019

Central banks could be left behind on digital currencies

Illustration: Eniola Odetunde/Axios

Government leaders and central bankers are spending more time studying digital currencies, but don't look any closer to launching one than they were 6 months or a year ago.

Why it matters: Facebook, by contrast, appears to have a prime-time ready product — its Libra digital currency — and shows every intention of pushing forward, despite the recent abandonment by a quarter of the members of the currency's governing body.

  • The status quo is not an option," Libra co-creator David Marcus said Wednesday at the IMF's fall meeting. "Whether it’s Libra or something else, the world is going to change in a profound way,"

Background: It's been a decade since Bitcoin emerged, threatening to replace traditional money with digital tokens that performed the most important functions of cash but did so outside the control of central banks and other governmental authorities.

  • Ten years later, the adoption of Bitcoin and cryptocurrencies has been inhibited by extreme price volatility and lack of transparency.
  • There is a race underway as private companies and sovereign governments push to develop the infrastructure and the money for the coming cashless society.

The big picture: The Fed and central banks around the world are responsible for overseeing and stabilizing the world’s money supply, but most are at risk of being left behind in this new phase.

  • 1.7 billion people have no access to digital payments, cross-border transactions carry an average transaction cost of 7%, and even sending money within a country is cost-prohibitive for people without bank accounts, Libra's Marcus says.
  • "The poorer you are, the more you’re paying for financial services."

What's happening: While a future without cash may seem distant in the U.S. — where more people write checks than use digital payments and there is a rising demand for dollars — the rest of the world is going there.

  • Countries like Kenya and India are already operating digital currency networks, and the People's Bank of China says it will release a digital currency this year.
  • Estimates show Chinese payment platforms Alipay and WeChat Pay handled $37 trillion in mobile payments last year, Fed governor Lael Brainard said Wednesday at a symposium on digital currencies held by the Peterson Institute for International Economics.

Yet the Fed is being "exceptionally cautious" in its possible development of a U.S. digital currency, Brainard, the Fed's leading financial authority — and a former undersecretary at the Treasury Department — told Axios during Wednesday's event.

  • A digital currency would have "profound implications for monetary policy transmission and potentially for financial stability," she said. "All of those things require a lot of careful consideration."

Go deeper

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 3 a.m. ET: 5,410,228 — Total deaths: 345,105 — Total recoveries — 2,169,005Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 1,643,499 — Total deaths: 97,722 — Total recoveries: 366,736 — Total tested: 14,163,915Map.
  3. World: White House announces travel restrictions on Brazil, coronavirus hotspot in Southern Hemisphere Over 100 coronavirus cases in Germany tied to single day of church services — Boris Johnson backs top aide amid reports that he broke U.K. lockdown while exhibiting symptoms.
  4. Public health: Officials are urging Americans to wear masks headed into Memorial Day weekend Report finds "little evidence" coronavirus under control in most statesHurricanes, wildfires, the flu could strain COVID-19 response
  5. Economy: White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Public employees brace for layoffs.
  6. Federal government: Trump attacks a Columbia University study that suggests earlier lockdown could have saved 36,000 American lives.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 2 hours ago - Politics & Policy

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

The CDC is warning of potentially "aggressive rodent behavior" amid a rise in reports of rat activity in several areas, as the animals search further for food while Americans stay home more during the coronavirus pandemic.

By the numbers: More than 97,700 people have died from COVID-19 and over 1.6 million have tested positive in the U.S. Over 366,700 Americans have recovered and more than 14.1 million tests have been conducted.

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

Japan's economy minister outlined plans on Monday to end the nationwide state of emergency as the number of new novel coronavirus cases continues to decline to fewer than 50 a day, per Bloomberg. Japan has reported 16,550 cases and 820 deaths.

By the numbers: Over 5.4 million people have tested positive for the virus as of Monday, and more than 2.1 million have recovered. The U.S. has reported the most cases in the world (over 1.6 million from 13.7 million tests). The U.K. is reporting over 36,800 deaths from the coronavirus — the most fatalities outside the U.S.