Jerome Powell’s office has not yet made a decision on the appropriateness of using the asset

​Fed chair says about no plans to launch digital dollar

09.03.2023 - 15:00

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2 min

President Joe Biden issued an executive order last year calling for “the highest urgency on research and development efforts” of a U.S. central bank digital currency, but in a hearing on Wednesday Federal Reserve Chairman Jerome Powell said it still could take years.

Speaking before the House Financial Services Committee, Powell said that the Fed and the recently formed Treasury Department interagency working group have not made a decision on whether a CBDC, or digital dollar, is something that the financial system and U.S. citizens want or need.

“We're not at the stage of making any real decisions,” he said. “What we're doing is experimenting in kind of early stage experimentation. How would this work? Does it work? What's the best technology? What's the most efficient?”

Worldwide, 11 countries, including China, have implemented their own CBDCs, and 114 countries are considering their own, according to data from The Atlantic Council, a U.S.-based think tank.

Although the creation of any CBDC meant for the broader public would require the authorization of Congress, Powell said a “wholesale” digital currency meant exclusively for use between banks and the Fed would not require approval.

The Fed chairman contrasted the timeline of creating a CBDC with the launch of FedNow, a central bank-developed service that would facilitate instant payments between banks and their customers, and is set to be released by the end of the year.

“We'll have real-time payments in this country very, very soon,” Powell said.

But stablecoins and a digital dollar would serve a different purpose than the FedNow service—and a different purpose still than other cryptocurrencies not backed by liquid reserves, which Powell said he “never understood the valuation of.”

While FedNow is meant for instant payments between traditional financial institutions using the traditional dollar, a CBDC in itself would be legal tender.

Powell added that stablecoins in part draw on the credibility of the U.S. dollar and that we don’t know for sure what's in the reserves of dollar-pegged stablecoins because no regulations address them.

In a hearing before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday, Powell warned about the “turmoil” plaguing the crypto industry and called for regulations for crypto products that mirror similar ones in traditional finance.

On Wednesday, Powell reiterated his support for a broad regulatory framework for digital assets and said clear regulations would improve transparency when it comes to businesses and Americans dealing with cryptocurrencies.

This material is taken from the website https://finance.yahoo.com.

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