The Fed is pushing forward with its study into implementing its own cryptocurrency and will be putting out a paper on the topic shortly, Chairman Jerome Powell stated this week.
No decision was made on the issue yet, he said, and revealed that the Fed does not feel a need to do anything quickly as other countries move forward with their own similar projects.
“I believe it is important that we get to a spot where we can make a better informed decision about this,” Powell said during his post-meeting media conference. “I don’t think we are behind. I think it is more important to do this correctly than do it fast.”
Powell continued on to say the Fed is “working proactively to look at whether to give a CBDC, and if so in which form.”
Creating a digital dollar was on the Fed’s radar for over a year, and it announced back in May it would create a deeper examination into the topic with a paper to soon follow.
The Boston Fed has taken the lead on the project, along with MIT within an initiative about whether the central bank should create its own digital currency for making the payments system better. Fed Governor Lael Brainard has been a strong supporter of the effort, although several officials, including Vice Chair of Supervision Randal Quarles, have had their doubts.
Advocates like Brainard state that a central bank digital currency’s benefits include accepting payments quickly in times of crisis and can also give services to the unbanked.
“We believe it is really crucial that the central bank keep a stable currency the American public’s benefit. That is one of our jobs,” Powell said. He applauded the “transformational innovation” in the sector of digital payments and said the Fed will work on the matter, including its own system called FedNow which is expected to go online in the year 2023.
The test for the CBDC, he stated, is “are there tangible benefits that outweigh any risks and costs.”
However, a large drumbeat has been increasing as central banks, and notably China, have pushed forward with their own strategy and started the first stages of implementing their own CBDC.
Author: Scott Dowdy