Coming out of the crypto winter, people are again starting to speculate about what the next trends in digital currencies will be.
Although some claim to have written them off altogether, many seasoned veterans of previous crises can see that the winter will pass and new prospects will soon emerge in the crypto and blockchain worlds.
One of the things that skeptics complain about the most - and rightfully, in many respects - is the lack of regulations and government oversight of digital currencies. A clear contributor to the problems that the world experienced this winter was the fact that these new currencies were simply allowed to “run wild” without sufficient oversight, and it was only a matter of time before the whole market crashed as a result.
In response to these concerns, there has been increasing speculation about the feasibility of centralized digital currencies for certain countries. Blockchain news is full of discussion about the benefits and drawbacks of this idea. In the US, the debate is already a very active one.
In the US, there is a body called the Financial Stability Oversight Council (FSOC), which keeps track of the entire US financial system. It is responsible for monitoring any potential problems with the financial sector posed by large banks or other types of financial holding companies. The FSOC has been increasingly concerned recently about the unregulated nature of crypto, and its leaders have been pushing Congress to take more concrete steps towards the creation of digital currency legislation.
One of the ideas being considered is the creation of a Central Bank Digital Currency (CBDC). The US isn’t the first to move in this direction. Nigeria already has its own version, known as the eNaira, which it has been using since 2021 China first piloted the e-CNY, or the digital yuan, in 2020 and started using it on a larger scale in 2022. Several Caribbean countries also created a common currency to make transactions among them easier. Other countries are nearing or just beginning the implementation of pilot projects, including Russia and India. In total, it is estimated that 90 countries are either actively experimenting with some form of digital currency or in the research stage of exploring the option.
In the US, as is often the case, the issue is complicated and fiercely debated between proponents and opponents. As mentioned above, some feel that centralizing the currency and making it subject to mandatory oversight would increase stability and reduce potential problems.
There are others, though, who completely disagree. Many Americans do not like regulation in general, often reiterating that this is why they broke away from Europe in the first place. Opponents claim that attempting to centralize another currency would be extremely costly, and also inefficient. Do we really need this, they ask?
There is also debate about what the nature of a digital currency might be. Should it be a digital dollar, or something else? Beyond that, there are privacy and fraud-related concerns
Another group that is sure to make a lot of noise is the environmentalists. There is no question about the harm to the environment that crypto mining causes, and to create enough of it to potentially supply the amount of demand there would be in a country like the US would be massive. And while Congress would certainly try to appease these groups with promises of carbon credit swaps and the like, it would surely have little effect on the greens, likely even emboldening their message.
Realistically, the possibility of something like this going through in the US is very low. There are simply too many opposing voices on all sides of every given issue to enact something so significant. Nonetheless, the debate is a healthy and worthwhile one to have. It could happen that the US Congress ends up coming up with a compromise and enacts legislation that better regulates existing digital currencies. Or that greater steps are taken to appease the environmentalists.
In any case, the US is not an isolated case, and the relative degrees of national currency success or failure in other countries will certainly inform the debate in the US. After all, the crypto winter affected the whole world, so we need to keep an eye on what is going on around us.