The US Federal Reserve will push ahead with plans on whether the US will create its own digital currency. On Wednesday, Fed Chairman Jerome Powell announced that the agency will be releasing a paper on the matter soon.
US Considering Its Own Digital Currency
The US has yet to decide if it will push through with the creation of its own digital currency. Even as other nations have speedily transitioned into crypto, the Fed said that it does not feel pressured to fast-track its decision-making.
“I think it’s important that we get to a place where we can make an informed decision about this and do so expeditiously,” Powell said at his post-meeting news conference. He added that “I don’t think we’re behind. I think it’s more important to do this right than to do it fast.”
The US central bank has been thinking about a digital dollar for over a year. The move accelerated earlier this year when the Fed announced it will study the proposal in more detail last May.
For now, Powell said that the Fed is carefully evaluating whether it will issue a Central Bank Digital Currency (CBDC). If it does, it will also need to define what form the CBDC takes.
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Boston Federal Reserve Takes Point Duties
The Federal Reserve of Boston took leadership duties for this project. It partnered with the Massachusetts Institute of Technology to study whether a US CDBC will make payment systems more efficient.
Boston Fed Governor Lael Brainard is a known advocate for cryptocurrency. Brainard advocates for a CDBC as it can get payments quickly to Americans during crisis situations.
A digital currency can also provide services to people who do not have the access to regular banks. However, many other members have their reservations, including Vice Chair for Supervision Randal Quarles.
“We think it’s really important that the central bank maintains a stable currency and payments system for the public’s benefit. That’s one of our jobs,” Powell said.
The Fed chairman took note of the “transformational innovation” in digital payments. He said that the agency will continue to work on the matter. This includes eventually launching its own FedNow system, which is targeting online status by 2023.
CBDC Benefits Should Outweigh Costs and Risks
Powell also said that the test for CBDCs is its benefits ratio. The “clear and tangible benefits” should outweigh the costs and risks. Despite assurances that they are working on it, many feel that the agency is acting too slow. Many major central banks, especially China, already made great strides in implementing their own digital currencies.
If the Feds don’t act soon, many see the dollar’s position as the global reserve currency getting challenged. However, Powell gave assurances about the dollar’s standing.
The Fed is in a good place right now to make a decision on CBDC. He also brought up regulatory concerns. Most likely, The Fed will need to secure permission from Congress before pushing through with its digital currency.
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“Where the public’s money is concerned, we need to make sure that appropriate regulatory protections are in place, and today there really are not in some cases,” Powell added.
Meanwhile In China…
Half across the world meanwhile, China’s central bank already rolled out its e-renminbi. Digital currency is now available for its citizens.
Customers and merchants can accept e-Renminbi even without an internet connection, credit card, or bank account. In 2022, when China hosts the Winter Olympics, officials expect international visitors to use the system as well.
Watch the CNBC Television video reporting that Fed Chair Jerome Powell says central still have no decision on central bank digital currency:
Should the US adopt a digital currency soonest? Is the US at a disadvantage if other countries will adopt one while they don’t? Tell us what you think about a potential US digital dollar. Share your comments below.