Central Banks

Alan Greenspan says there's 'no point' for central banks to issue digital currency

Key Points
  • "There's no point for them to do it," Alan Greenspan said at Chinese finance magazine Caijing's annual economic outlook conference.
  • The former Federal Reserve chairman said national currencies are backed up by sovereign credit, something no other organization can offer.
  • "The fundamental sovereign credit of the United States is far in excess of anything Facebook can imagine," Greenspan said.
Alan Greenspan
Anjali Sundaram | CNBC

BEIJING — Former U.S. Federal Reserve Chairman Alan Greenspan said Tuesday that there is no need for central banks to issue digital currency.

"There's no point for them to do it," Greenspan said at Chinese finance magazine Caijing's annual economic outlook conference.

He pointed out that national currencies are backed up by sovereign credit, something no other organization can offer.

"The fundamental sovereign credit of the United States is far in excess of anything Facebook can imagine," Greenspan said.

The social network company made waves earlier this year by announcing plans for a cryptocurrency project called Libra that had key partnerships with major global payment processing companies. However, last month Visa, Mastercard, PayPal, Stripe and eBay said they were dropping out of the coalition behind Libra, amid increased scrutiny from the U.S. government.

Meanwhile, the People's Bank of China has been pressing ahead with work on its own digital currency, although it's unclear how soon it will be released.

Philadelphia Federal Reserve President Patrick Harker said in early October it is "inevitable" that central banks including the Fed will issue digital currency, according to a Reuters report. He said his view was "in the minority" at the Fed, but that his staff is researching the issue, Reuters said.

Digital currencies captured worldwide attention in 2017 when the price of bitcoin soared from a few hundred U.S. dollars to nearly $20,000. Many enthusiasts of bitcoin's underlying blockchain technology say its merits lie in its decentralized system, which is at odds with the central control of an institution.

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Key Points
  • Jack Lee, managing partner of HCM Capital, said China has developed a framework called the Digital Currency Electronic Payment or DCEP.
  • That would allow its central bank to issue a digital currency to commercial banks and third-party payments networks by Alipay and WeChat Pay, he explained.
  • Several experts have warned that virtual currencies could increase the risks of fraud, particularly money laundering and terrorism financing. But many governments have not found a way to regulate the space.
  • Daniela Stoffel, Switzerland's state secretary for international finance, said the expected launch of China's digital currency could push authorities around the world to decide on how they want to use and regulate such technology.