U.S. Federal Reserve Chair Jerome Powell has indicated a willingness for the Federal Reserve to start issuing digital currencies. Powell indicated that the Federal Bank issuance of the digital currency was a work in progress, indicating that they had already taken initial steps into researching the project and how it would impact the US economy.
During a meeting on Monday hosted by the International Monetary Fund discussing digital payments, The Fed Chair indicated that it was more important for the US to get it right than be first in reference to digital currencies.
Opinion on digital currencies by the Fed Chair
Powell continued by saying that this meant that they would look at the potential benefits of the CBDC (Central Bank Digital Currencies) and potential risks that would come with using such a form of payment. He indicated that trade-offs should also be considered when deciding whether to issue a Federal Banked backed digital currencies, emphasizing that caution should be taken on such a decision.
Powell added that besides the benefits that such a currency can bring to the US, some difficult policy and operational questions needed to be answered before taking a leap of faith into the CBDC. Some of these risks, Powell continued, included cyberattacks, counterfeiting and fraud. The question of how the implementation of a CBDC would impact monetary policy and financial stability in the country, an issue the chair indicated that it had to be considered before going all-in on digital currencies.
Powell continued by indicating that although the Feds had not decided on implementing digital currencies, they were, in what he called ‘ active participant in research,’ that would result in the Federal reserve collaborating with other central banks in issuing the currencies.
One such research was a collaboration between the Federal Reserve Bank of Boston and the MIT (Massachusetts Institute of Technology), which are currently developing a hypothetical digital currency that can be issued by the Federal Reserve.
Around the world, central banks have also been toying with the idea of implementing similar digital currencies ideas. This, especially, gained pace after Facebook indicated that it would be launching its own digital currency, which sent governments worldwide into a frenzy on what that would mean to their local currencies.
Countries such as China, have also indicated that they are at advanced stages of developing their own digital currencies that would rival the US dollar as the main reserve currency. Successful deployment of digital currency in China would see international trades starting to make use of digital currencies due to China being the largest exporters in the world.