As for the digital currency, it usually means an increasing scale of the private sector to replace the national currency, which is part of the financial technological revolution. Encrypted currencies including Ethereum and Bitcoin are digital currencies which might be utilized for global payments. We do not believe that the national currency is a digital currency. Besides, not only central banks also issue digital currencies, but also commercial banks. Almost anybody with the deposit account has used the online currency issued through the bank, and bank assures that it can exchange the value of the digital currency of central bank or equivalent coins. It makes sure that the dollar in the bank account is the similar value as the dollar bill. The bank’s deposit protection covers a state deposit, which is now $ 250,000 in the United States. Besides, the government does not regularly guarantee the conversion of the currency of central bank (whether digital or paper currency and currencies), but as we saw in 2008, the government can temporarily guarantee the conversion much higher than that limitation aims to prevent a collapsing system.
The Fed has already proven this. As part of the strategy to gradually raise interest rates, an overnight purchase agreement (ON RRP) was introduced, which allows some non-bank financial institutions to deposit money with the central bank overnight in the same way to banks. The currency deposited at the central bank will be converted to one-to-one newly created reserves: The assets of commercial banks replaced by these reserves will be destroyed. So when one takes money the next day, it has become central bank money.
The Fed has refused to expand the RRP trade to companies other than households. But in theory, there is no reason, and it is impossible to deposit money in the central bank. Many believe that factories and economists have seriously suggested that the Central Bank provides payment tools for the deposit account of all businesses and households. This extends the reserve (digital currency issued through the central bank) to everybody. Digital money developed through commercial banks is a thing of a past. The central bank could have overseen the creation and spending of the money.
Besides, if every central bank deliver digital currencies directly towards households and companies, even large central banks can keep global interim payments in several currencies without the requirement for correspondent banks. Such a network of central banks already exists to some extent, as the exchange rate between world reserves can be handled perfectly using the exchange line established in 2008 to ensure that large central banks can deliver unlimited access to their countries/territories. Dollar liquid Commercial banks are in financial crisis. These exchange rates were constant in 2013. One possible path to a new kind of global central bank payment network using digital currency is for banks to give companies and households access only to the central bank’s real-time gross settlement system (RTGS), consisting of Fedwire. Or they can use blockchain technology or other distributed led technology to build new, fast, secure, and open spaces. The Bank of England, the Central Bank, the European Central Bank, and the National Bank of China seriously consider the blockchain system as a global payment mechanism.