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Jay Powell on Thursday accelerated Federal Reserve consideration of a possible digital version of the dollar that would be controlled by the U.S. central bank.
The Fed presidency said it would call for public comment on the idea, amid pressure from some U.S. lawmakers and growing interest in the so-called central bank digital currencies (CBDC) worldwide.
In a rare video statement released On the Fed’s website, Powell stressed that there were possible benefits and pitfalls associated with digital currencies and highlighted the growth of so-called stable digital currencies, the dollar-linked private digital currencies, which he said could pose a threat. for the financial system.
“The effective functioning of our economy requires people to have faith and trust not only in the dollar, but also in payment networks, banks and other payment service providers that allow money to flow daily,” he said. .
“Our focus is to ensure a secure and efficient payment system that provides broad benefits for American households and businesses while adopting innovation.”
The Fed has long been considering a digital currency issued by the central bank, but has been more skeptical than monetary authorities in other countries. China is already piloting a digital renminbi.
Powell said any CBDC should serve “as a complement and not as a replacement for cash and current digital forms of the private sector dollar, such as deposits in commercial banks.”
The Fed would release a paper this summer “to stimulate broad conversation,” he said, and would solicit input on issues related to payments, financial inclusion and privacy, among other topics.
He added that the Fed would try to play “a leading role” in the evolution of international standards for CBDCs.
Powell said the Fed was closely monitoring private sector payment innovations, including the launch of stablecoins and fluctuations in cryptocurrency prices such as bitcoin.
“Cryptocurrencies have not served as a convenient way to make payments because, among other factors, their value changes,” he said. “Stablecoins aim to use new technologies in a way that can improve payment efficiency, speed up settlement flows and reduce end-user costs, but they can also pose potential risks to these users and to the financial system more wide”.
As stables proliferate, he urged improved regulatory oversight, which “includes attention to private sector payment innovators who are not currently within the traditional regulatory agreements applied to banks, investment firms and other financial intermediaries.”
Powell said the next discussion paper would mark the “beginning of what will be a reflective and deliberative process” and promised to hear a “wide range” of voices before making any decisions.
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