Fed ‘Working Proactively’ To Issue Its Own Digital Dollar — Could It Topple Bitcoin and Other Cryptocurrencies?
Fed Chairman Jerome Powell has reiterated that the Fed is in the process of evaluating the issue of a central bank digital currency (CBDC) and that it will release a whitepaper on digital currencies “soon.”
He had previously announced the whitepaper in July, saying its goal was to begin a major public conversation and lay out the potential benefits and also the potential risks of a CBDC.
Powell said that while it’s really important that the Central Bank maintains a stable currency and payment system for the public’s benefit, “we also live in a time of transformational innovation around digital payments, and we need to make sure that the Fed is able to continue to deliver to the public a stable and trustworthy currency and payment system,” according to a transcript of his speech. Powell added that the Fed needs to make sure that appropriate regulatory protections are in place, “and today they really are not in some cases.”
“So with that in mind and with the creation of myriad private currencies and currency-like products, we’re working proactively to evaluate whether to issue a CBDC,” he said.
The Chair explained that there are two broad workstreams. One of which is technology, both at the Board and in the Federal Reserve Bank of Boston’s work with MIT. As for the other, it aims to identify, scope out, deal with and analyze the various public policy issues, he said.
“We think it’s our obligation to do the work, both on technology and public policy to form a basis for making an informed decision. The ultimate test will apply when assessing a central bank digital currency and other digital innovations is, are there clear and tangible benefits that outweigh any costs and risks?”
David Grasso, CEO of Bold TV, told GOBankingRates that the Fed’s digital currency would be what it sounds like — government-sanctioned digital dollars that don’t require banks to act as an intermediary.
Grasso added that some people are worried a digital dollar could compete with major cryptocurrencies, such as Bitcoin. In addition, he said that many argue America is falling behind other economic powers who are racing to release their digital currencies.
When asked about that point, Powell said he didn’t believe the U.S. was falling behind in the global race for digital currency.
“I think it’s more important to do this right than to do it fast,” he clarified. “We are the world’s reserve currency. And I think we’re in a good place to make that analysis and make that decision.”
Powell stated that the Fed “would have to have a meeting of the minds with the Administration and also probably with Congress.”
Noting that this will be a government-wide decision, he elaborated:
“We would really like to have broad support for this. It’s a very important innovation. And I think we would need to go ahead, and that’s the process we’re engaged in.”
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