Jerome Powell, Federal Reserve Chair, stated that a digital currency issued and maintained by the U.S. Central Bank was ‘a very important financial innovation’. Jerome Powell, the Chair of the U.S. Federal Reserve, said that Congress will receive guidance from it on how to implement a central bank digital currency.
Powell stated that he believes it was something the country should explore. He also said that the possibility of a CBDC being issued “shouldn’t be seen as partisan.”
He said that “We’re doing great work” and added that Congress will have to write legislation authorizing the implementation of the guidance into the U.S. Financial system once it is complete.
Officials have been contemplating the possibility of a digital currency that is backed by the U.S. government for years and considering the potential benefits and risks. Implementing a “digital dollar” could have a major impact on crypto and allow the wider public to experience the benefits of digital currency transactions.
Powell stated that it was a “very important potential financial innovation” that would affect all Americans. “We plan to work on both policy and technical aspects in the coming years, and then come up with a recommendation to Congress.”
A digital dollar proposal
Since 2017, the Fed has been looking into the possibility of a digital currency. The Fed has been considering the possibility of a digital dollar since 2017.
In a press release, Himes stated that the United States government must embrace innovation sooner than it can wait. “It’s time for Congress to review and pass legislation that would allow a U.S. CBDC.
Himes asked Powell if he had looked at the proposal. Powell replied that he had printed it and had the paper, but hadn’t been able “to read it carefully”.
His statements about the supremacy of the U.S. Dollar echo those made earlier this month by Powell at a Federal Reserve Board sponsored research conference.
Powell stated that the Federal Reserve was looking into whether a U.S. central banking digital currency could be used to improve on an already efficient and safe domestic payment system in light of the huge growth in crypto-assets and stablecoins . A U.S. CBDC could help to maintain the dollar’s international standing, as the Fed’s whitepaper on the topic points out.
Lael Brainard (Fed’s vice-chair) made remarks in May to the House of Representatives’ Committee on Financial Services about the potential benefits and dangers of a digital currency from the U.S. Central Bank. He stated that its implementation was possible.
She said that CBDC could be used in future situations to complement stablecoins, commercial bank money, and provide a central bank liability for the digital financial ecosystem. This is similar to cash, which coexists with money commercially.
Brainard explained that such a CBDC must be “privacy protected, intermediated and widely transferable” and would also need to be identity verified.
Following the January release of a paper from the Fed about the potential pros and cons a CBDC, her comments were invited for public comment.