See https://en.wikipedia.org/wiki/Real-time_gross_settlement
Domestic banks have accounts with the central bank and can move money using RTGS. If the central banks allowed individuals and non-bank companies to open accounts then they could use the RTGS to transfer money instantly.
There would be no blockchain, the central bank acts as a trusted third party. The central bank can see all transactions.
But I guess this is a good example of a new tech that reminds people that the basics are still not out of place.
I proposed a semi-centralized crypto currency with the same things in mind but based on existing fiat some time ago: http://www.reddit.com/r/altcoin/comments/1t6nu0/altcoin_prop...
1) It requires the US government to run the payment network. That's an expensive and security sensitive installation. The government, by far and large, isn't terribly good at running IT installations (see, the recent healthcare.gov)
2) The governments like to exercise capital controls. They do that way of the banking system. If it introduced digital $, they can't control it. Because anybody with a wallet could receive and spend them, assuming that everybody can create a wallet.
3) If not everybody can create wallet, i.e. the wallet needs to be governmental registration, it puts further demands on the features of the IT installation of the government. This isn't making it it any more likely to happen.
4) The credit card and banking industry would feel themselves threatened. Because, a lot of what they do would be taken over by the government, there'd be no end of political flamewars and stalemates trying to get this trough.
5) You're assuming that the government running the payment network would somehow, magically, be better than credit card companies. I very much doubt that, transaction fees would probably be even higher, and reliability would probably be pretty miserable.
- Recent revelations about NSA activities, make out any cryptocurrency designed by USA, to be unsafe. It is the biggest single damage done to trust factor of US tech industries.
- Sooner or later, diplomatic pressure would be made upon smaller countries to have their forex reserves in crypto currency, and sooner that pressure will spread to bigger countries. Some will oblige, some will build walls(leading to economic sanction---> war possibilities{one word: CHINA)
- Then on, hit a button, all forex reserve belongs to USA.. or worst case scenario, to someone who gets access to weakness in the cryptocurrency. Resulting in world economic chaos.
we are talking here about the same measures and standards, taken to make sure there are no counterfeit paper currency in the market.
The "Federal Reserve" is a federation of privately-owned banks authorized by the US Government as the banking monopoly that is permitted to issue its currency. The Federal Reserve is the bank that US government borrows from, and the private banks that issue the funds to the US Government make profit off of the loan. Excess profits (outside of legally stated limits) get returned to the tax payers. The saying goes -- there "Federal Reserve" is as "Federal" as "Federal Express (FedEx)".
Understanding this, the banks that make up the Federal Reserve are the banks that issue credit cards and make money off of financial transfers. The Federal Reserve is not going to do anything to endanger the profits of its member banks. So while the Federal Reserve could create a crypto currency, assume it would be laden with an oppressive fee structure, issued and collected by its member banks. Every bank covered by the FDIC is a member bank / Federal Reserve.
The only things consumers could get out of this is convenience. Banks are hungry for profits, so there would be fees, there would be advanced currency tracking (think FBI / NSA), there would be no privacy, there would be electronic fraud that may or may not be able to be reversed.
(1) The Federal Reserve has 12 member banks, none of which are private--they're really just branches of the central bank. Those member banks have shareholders consisting of local private banks. These 12 banks don't pick monetary policy. The Federal Reserve board does. Only 1 of the 7 members of the Federal Reserve Board can be picked from the leadership of the 12 member banks. Since the Federal Reserve Board is what actually decides monetary policy, its nonsensical to think of the Federal Reserve as a federation. Because its not. Its a central bank, and has very centralized power.
(2) While banks are part shareholders in the central bank's member banks, IT IS NOT ORGANIZED LIKE AN ACTUAL CORPORATION. They do not 'own' federal reserve banks. They cannot sell their shares, and make no money from them (well, they might earn meager interest). Its literally just a deposit that they make with the Fed that entitles them to send representatives to their regional bank. Even if each member bank was totally dominated by the will of their member banks (which there is no incentive for this to be the case), the sum of their influence on monetary policy is their single representative in the board of governors (who was confirmed by congress!)
(3) The federal government does not borrow directly from the Fed. It issues bonds to the general bond market through weekly auctions directly from the Treasury, and the Fed buys those in the aftermarket to manipulate interest rates. Doing this requires them to add or subtract cash from the money supply. Obama doesn't call Bernake, say "Hey Ben, we need some money for the kitchen we're remodeling", and get the response "Check your bank account, already wired the money! LOL!".
There is plenty of information on the the federal reserve's website describing exactly how its organized.
At the end of the day, if there is ANY chance of the US dollar being replaced by another currency as the dominant currency in the US economy, the central bank will get involved. Moreover, if bitcoin ever gets big enough to have an actual economy that isn't just people converting to US dollar (ie, rent, bills, and wages are paid with bitcoin), we'll have a grand opportunity to test whether having monetary policy is actually a good thing, or if its bad. Because if its bad, and we discover that having a central bank control the money supply is actually a Good Idea, then consumers WILL NOT choose bitcoin.
Hopefully by then there will be some implementation by some central bank somewhere that makes sense, so that we get all the benefits of a digital currency without all the inflexibility of bitcoin's built in monetary policy.
One bonus of having gov digital currency is quick and easy transfers avoiding bank fees/delays and fraud of ach and wires. Another bonus is you can use Fedcoins in a decentralized p2p exchange to trade them for other coins.
Nobody would trust this. Bitcoin works because people trust it, because it's built on open source and P2P principles, so they trust it because it's "trustless". That's where most of its value comes from. People also trust the US dollar because it's been around for so long, and nobody even thinks about it anymore.
So yes, the Fed Reserve could come out tomorrow and say that 1 FedCoin = $1, and dollars are gone from existence (unless you're suggesting FedCoin should compete with the dollar? But then what's the point?), all of them being replaced by trillions of FedCoins. And the next day FedCoin would drop in value by half, taking the US economy with it.
No, it doesn't. Federal revenue runs about 2.5-3.0 trillion.
Though such a system would certainly give the FED more control over the economy, I don't know how beautiful that would be.
As for making the USD easier to use on the web, I think we call this system PayPal. Except it should be less evil.
We literally ship jumbo-jets full of $100 bills abroad so that foreign banks can maintain adequate reserves. If we cared about this, we'd print $10,000 bills. The system as it stands funnels movement of large amounts of money, which eases tax collection and other enforcement measures.
