U.S. Federal Reserve Chairman Jerome Powell has clarified the outlook on how a U.S. central bank digital currency (CBDC) or digital dollar might be issued in the near future. Citing that the coming years are focused on research and building public confidence in CBDC as more important priorities for now.
US Central Bank Digital Currency Will Take Couple of Years
During a panel discussion on digital finance hosted by Banque of France, Federal Reserve Chairman Jerome Powell provided an update on the central bank’s digital dollar. He began stating that cash is not disappearing in the United States and is still used quite a lot. However, the central banker noted that compared to non-cash payments, cash is declining, but not in absolute terms.
The U.S. central bank will be working with Congress and the executive branch to assess the policy and the technological issues of CBDC. Adding collaboration would bring expertise on that matter as they also need approval from the executive branch and Congress on a central bank digital currency before Fed can move forward. Powell expressed that Fed will take time to build public confidence in its policies and decisions. Outlining that the process would take at least a couple of years
The central bank leader said that the U.S. has “not decided to proceed” with the issuance of a CBDC for the time being and the FED has not reached a decision on whether to issue a digital dollar. Powell concluded that they are in the process to work and assess the CBDC.
US Central Bank Digital Dollar: Potential Costs And Benefits
Powell said that the Federal Reserve is looking at the potential costs and benefits of issuing a central bank digital currency in the U.S. He explained that in broad scape, Fed is evaluating CBDC’s policy issues and technology issues. Powell described if CBDC is adopted it would have several key characteristics: intermediation, privacy-protected, identity-verified, and interoperability.
Powell said at his post-meeting news conference that the ultimate test in assessing a central bank’s digital currency and other digital innovations is whether clear tangible benefits outweigh any costs and risks. Powell was asked whether he is concerned that the U.S. is falling behind in the area of central bank digital currencies. He stated that Fed does not feel pressured to do something quickly as other nations move forward with their own projects. Emphasizing the importance to do this right rather than doing it fast. As the US is the world’s reserve currency and careful analysis is needed as it is a government-wide decision.
According to a CBDC tracker by Atlantic Council’s Geoeconomics Center, 105 countries are exploring issuing their own digital currencies. Some countries have already issued a CBDC, including China, which has been testing its digital yuan and will be set to expand in 2023.