House lawmakers urge Fed to launch digital dollar pilot

Dive Brief:

The leaders of the House Financial Services Committee's Artificial Intelligence Task Force urged Federal Reserve Board Chairman Jerome Powell in a letter Monday to develop a U.S. dollar digital currency if the central bank is not already doing so.
The Fed risks losing control of monetary policy if private companies — and not the government — are relied on to develop digital currencies, Reps. French Hill, R-AR, and Bill Foster, D-IL, wrote.
The letter stems from concerns connected to the ongoing development of Facebook's Libra project, as well as JPMorgan Chase's tests of its own blockchain-backed digital coin and Wells Fargo's pilot of a digital cash platform.

Dive Insight:

Hill and Foster asked a series of questions in their letter, including how the Federal Reserve would respond if digital currencies gain traction, what "legal, regulatory or national security issues" would prevent the Fed from developing a digital dollar, and what risks stem from failing to develop one.

More than 40 countries, including Sweden and Uruguay, have developed a digital currency or are looking into it, the lawmakers wrote, citing data from the Bank of International Settlements. China's central bank is expected to launch a digital version of the yuan by early next year, they wrote.

The lawmakers cited a desire for the dollar to remain competitive but also expressed concern that the government could cede its power to enforce anti-money laundering (AML) and anti-terrorism financing policy if private companies continue to lead the charge on digital currency. AML concerns were at the root of several questions lawmakers asked David Marcus, the Facebook executive leading the Libra project, in two days of testimony on Capitol Hill in July.

Hill and Foster also asked Powell to describe any design features Congress would have to consider in the launch of a digital dollar pilot, including "access and transfer mechanisms for such currency, the degree of anonymity of transactions," the parameters of the pilot program, and cyber and operational considerations.