There is no doubt the government is pushing for digital currency in the United States. In March 2022, Biden released Executive Order 14067 entitled Ensuring Responsible Development of Digital Assets. Since that time, according to Investopedia, they ,”…released a framework outlining the regulation of digital assets, including cryptocurrency and other items of value that exist only in digital form. The framework includes ways to make the handling of these assets easier and to ensure the digital asset space is resistant to fraud.” This action includes the formation of US central bank digital currency (CBDC). With environmental sustainability at the root of this transformation, the CBDC also promises a more efficient system for payments, technical innovations, and improved cross-border transactions. If you are not re-evaluating your portfolio mix by now, you may want to start.
What is Digital Currency?
The future of digital currency is inevitable given today’s technological advancements. This peer-to-peer payment system allows anyone to send or receive payments anywhere. In lieu of physical cash money, a cryptocurrency transaction exists as a digital entry in an online database. While it makes sense, it also brings about fear over losing our existing system of currency and how it will impact our lives and our investments.
Atlantic Council’s research states that Project Cedar is founded for the progression of a central bank digital currency and is already supported by the Bank of Japan, European Central Bank, and the Bank of England. The Reserve Bank of India also came out with a planned launch of a digital currency of their own. Other countries including China, Jamaica, and other European countries are moving toward digital currency, or already have.
The Difference Between Digital Currency and Cryptocurrency
While notably similar, digital currency and cryptocurrency vary from each other in an important way. Cryptocurrency (Bitcoin, Dogecoin, etc.) is used in a decentralized network.
Digital currency (fiat) is based on CBDCs centralized blockchain technology. In other words, a central bank, possibly with the assistance of a third-party company, oversees digital currency in a centralized manner. They key difference is centralized versus decentralized currency.
Why Digital Currency?
As with everything these days, digital currency and associated other currencies are naturally controversial. In some ways, we are already using digital systems like Zelle, Venmo, and other mobile banking tools. While there are advantages in this digital age, there are also some concerns: scalability, value/volatility, regulations, increased cybercrime (identity theft and privacy where a digital footprint is used), making the transformation, and the fear of losing your stable assets. In addition, there are concerns for the elderly making such a change, rural communities in which Internet connectivity is poor, data harvesting, added charges for digital processing, and system vulnerability given our worldwide unrest and the potential for natural disaster or war.
There is also much speculation about why the government would want Americans to get rid of their cash assets: consumer convenience, reduced crime in terms of theft of physical money, worldwide ease in transactions, and reduced need for handing staff in our institutions. Some speculate simply: government control of our assets and a piece of the great reset.
The Reality: The Government is Replacing the US Dollar
The real truth is, the nation appears to be replacing the US dollar, and many countries are replacing their own current methods of currency. The US dollar remained strong in 2022 according to Marketplace.org. It was noted, “The dollar’s value relative to other currencies has dipped over the past few months,“ citing the weakening US economy. It may not come as a surprise that gold and bitcoin are natural frontrunners to replace your personal reserves. What every American we can do right now as we move to this era of digital currency is to re-evaluate their current asset portfolios and integrate other forms of assets amidst nationwide uncertainty. Gold is the most obvious choice and has historically shown to be a hedge against inflation. Contact Reagan Gold Group (RGGUSA) today and see if a precious metals investment may be worthwhile during these trying times.