Governments Eye Fedcoins As A State-Owned Mobile Payment System

As consumers have become comfortable using mobile payment systems, fewer people are carrying cash. Bitcoin is almost mainstream now and it has staying power; we are starting to see governments considering Fedcoins, the term given to digital money issued by a central bank, as a way to facilitate cashless payments without the price volatility experienced by Bitcoin and other cryptocurrencies.

Numerous wrinkles would have to be worked out first. An economics professor noted that digital currency transactions are processed immediately, unlike cash transactions, which require paper money to be transferred. While immediate payments are useful for consumers buying online, large-scale withdrawals, such as those that occur during a financial crisis, may leave a central bank penniless.

Sweden’s government is closer than any other nation to adopting a national, government-backed cryptocurrency.
The Bank of Canada and the People’s Bank of China have discussed a digital central bank currency as well. Only 15 percent of Sweden’s consumers use cash to make a purchase, with an increasing number of Swedes relying on commercial payment technologies to pay for items. Experts say that a cryptocurrency has its drawbacks, since marginalized individuals, who are not tech savvy, rely on the krona. Additionally, few individuals would be comfortable with a currency perceived as more volatile than gold. Even financial counselors say that low-income individuals should not rely on a currency that has a value that is constantly changing.

To certain individuals in the US, and presumably others in nations with stable economies, paper money represents security. Even with Apple Pay, debit cards bit coins and alt-coins, physically storing cash, whether it is in a safe or under a mattress, is immensely satisfying. If Sweden or other nations begin issuing Fedcoins, there will be communities where early adopters find that they are alone, which may lead them to stop using Fedcoins. People need to see others using Fedcoins regularly in order for electric money to take hold.