- Fed Chairman Jerome Powell once again laid out his thoughts on a digital dollar today.
- "There’s quite a lot of work yet to be done," he said.
- The Fed is still considering a CBDC. But it's in no rush.
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When most heads of central banks talk about central bank digital currencies—state-run digital currencies that could function as alternatives to cash—each often seems eager to say that they’re considering it the most, but equally the most reluctant to issue one.
Jerome Powell, Chairman of the Fed, appeared the most committed and simultaneously the most reluctant today when speaking at a virtual conference hosted by the European Central Bank, beating out stiff competition from the President of the European Central Bank and the Governor of the Bank of England, who did much the same.
When asked about his thoughts on a central bank digital currency (CBDC), Powell started, “Here at the Fed and in the US we are committed to thoughtfully and carefully evaluating the potential costs and benefits of a central bank digital currency.”
An excellent start. The Fed’s is really taking this seriously. China, which is piloting its own CBDC and thus the outlier, better watch out!
Powell’s speech then hit its apex: “We’ve been actively participating with… other central banks at the [Bank for International Settlements, known as the ‘central bank of banks’) to look at this and we feel that’s been a very productive collaboration.”
So, when pilot? Surely just around the corner. “We haven’t made a decision to issue a CBDC and we think there’s quite a lot of work yet to be done as we engage with public constituencies here in the US and around the world.”
“Also, the dollar is the world’s principle reserve’s currency and I can assure you that we will approach that question with great care.”
It turns out that the USA isn’t desperate for a CBDC. The Fed thinks that its payments systems are already good enough.
“From our standpoint, the main focus is on how a CBDC could improve what is already a safe, effective and dynamic payments system. We actually still do have strong demand for cash here,” said Powell.
“As the main reserve currency, we do feel it’s critical that we really get it right as opposed to trying to be the first.”
Next up is Christine Lagarde, President of the European Central Bank. “We’re not racing to be first,” she said. “If it is going to contribute to a better monetary sovereignty … for the Euro area, I think we should explore it.”
Powell, Lagarde might’ve one-upped you.