Federal Reserve Chairman, Jerome Powell said in an International Monetary Fund (IMF) panel today that the U.S central bank is considering the feasibility of issuing a central bank digital currency (CBDC). Still, they will continue to approach the matter with “great care.”
According to Powell, the Federal Reserve remains committed to carefully evaluate the potential costs and benefits of a central bank digital currency for the U.S economy and payment system, as well as its international implications.
So far, he mentioned that the Federal Reserve has “been actively participating with other central banks and the BIS in [researching central bank digital currencies] and, and feel that the collaboration has been productive.”
Despite the progress being made to research such a prospect for the U.S, Powell pinpointed that they have not made a decision to issue a CBDC and believe that “there’s a great deal of work yet to be done, as well as extensive public consultation to be had with all stakeholders before making such a decision”
Such extensive consultation is necessary given that the “dollar is the world’s principal reserve currency” and thus, the Fed Chair explained that they are “approaching [the CBDC question] with great care.”
While a central bank digital currency would introduce faster and cheaper transactions, he noted that there are more complex issues including “addressing a decline in the use of physical currency, modernizing the payment infrastructure, and reaching consumers that have been traditionally underserved by financial institutions.”
In the case of the U.S Powell said the Federal Reserve is trying to figure out where a CBDC would fit in an already “safe, effective, dynamic and efficient domestic payment system.”
There is still “strong demand for cash,” in the U.S as opposed to other countries where digital payments are on the rise. Additionally, the country has a highly banked population with access to the electronic payment system.
Thus, he argued that the country isn’t an ideal jurisdiction for CBDC issuance at this time, but that the Federal Reserve will closely continue to monitor developments from the over 80% central banks also researching central bank digital currencies.
