(Bloomberg) — Federal Reserve Chair Jerome Powell said the central bank will launch a centerpiece research paper this summer on digital currency and seek public input, as he and his colleagues weigh how to proceed in this area.
“We are committed at the Federal Reserve to hearing a wide range of voices on this important issue before making any decision on whether and how to move forward with a U.S. CBDC,” he said in a statement Thursday, referring to central bank digital currencies.
The announcement, during a week of intense volatility in cryptocurrencies, marks a shift in momentum on the CBDC topic at the Fed, which until now has mostly been a technological research project at its regional branch in Boston.
Powell said he wants the Fed to play “a leading role” in the development of international standards. Central banks around the world — most notably the People’s Bank of China — are moving ahead with digital currencies which could give them a head-start in how standards develop.
Fitting In
A key issue for Powell and other Fed officials is how such technology would fit into the current U.S. banking system, which already deals with electronic payments in a variety of ways.
Critics of the current system say it locks out many low-income people and charges them fees for basic services that people with high account balances don’t suffer. Digital currency accounts held by individuals could serve as a form of competition. Still, the banking system offers high protection for depositors, including insurance, that a less regulated system may not offer.
“Our key focus is on whether and how a CBDC could improve on an already safe, effective, dynamic, and efficient U.S. domestic payments system,” Powell said. “We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks.”
Powell said that “to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value.”
He said he hoped the paper would represent a thoughtful process.
“Irrespective of the conclusion we ultimately reach, we expect to play a leading role in developing international standards for CBDCs, engaging actively with central banks in other jurisdictions as well as regulators and supervisors here in the United States throughout that process.”
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Source: Newmax
