The Federal Reserve has embraced the potential of digital currencies in a new white paper outlining plans to improve the US financial landscape.
Although the euphemism “digital transfer vehicle” is used instead of Bitcoin, this marks a major shift in attitude from the organisation’s 2013 report, where it dismissed cryptocurrencies for not being a “sufficiently mature technology” to play a role in mainstream American finance.
The Fed report looks particularly favourably on the broad accessibility of digital currencies, their ability to facilitate low cost transfers within and across national borders, and the potential to nurture payment technology innovation.
However, Bitcoin’s independent nature is clearly still believed to be a threat to government agencies. Difficulties in tracking and monitoring payment behaviours are felt to interfere with surveillance, counterterrorism efforts and criminal investigations – aspects that US agencies are unlikely to compromise on.
More cynical commentators have suggested that the kind of changes that Bitcoin would have to undergo to make it palatable to mainstream finance organisations would contradict the essential nature of the project. Cryptocurrencies, they say, emerged as an effort to cut ties with fiat currency structures and demonstrate a democratic means of creating and moving money. If Bitcoin is a revolution, goes the rhetoric, the old guard should accept that they can’t be part of it.
“During the industrial revolution thousands of skilled blue collar labourers were replaced by machines that increased production beyond imagination. Why should the digital revolution be any different?” wrote Alex Gorale in Cryptocoins News.
“Software protocols can replace skilled white collar workers. Bitcoin makes obsolete a closed-door finance industry that works against the consumer. Trying to assimilate some of Bitcoin’s benefits with the Fed is like scrubbing a stain with a filthy rag.”
The emphasis to overhaul corporate and consumer payment technologies in the US goes hand in hand with plans to the change the government’s own payment systems. The General Services Administration announced plans this month to modernise remittance and procurement technologies in government agencies to improve monitoring and transparency.
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Deutsche Bank plans to partner with fintechs that have complementary business models, rather than buying out tech start-ups and competing in the market, bank executives said at press briefing this week. They also discussed future strategies for the technology, securities and payments spaces.