The US Federal Reserve needs its own digital currency, said Fed chairman Jerome Powell. As he added, the creation of a CBDC is “Very high priority” central bank.
Jerome Powell: We need CBDC
Stablecoins and cryptocurrencies could become important to the current financial system almost overnight, says US Federal Reserve Chairman Jerome Powell. As he added, this is why the Fed is determined to create a central bank’s digital currency (CBDC).
CBDC is the banking industry’s response to cryptocurrencies and stablecoins. Although they can be hosted on a blockchain, they have little to do with e.g. Bitcoin. The CBDCs will in practice be supervised by the banks that issue them. In other words, they may not differ much from fiat currencies, and actually be their digital equivalents.
Powell was interviewed by Yahoo Finance. Advances in technology have now allowed private entities to create their own money, he said, and history has already shown that this should be avoided.
Powell, he admitted, can in turn envision a rather dark scenario in his eyes in which stablecoins suddenly become important to enough people to turn into overnight.systemically important ”. He said the Fed still does not know how to react to such an event and admitted it is not even close to understanding the scale of the threats.
– [Stablecoiny] can become systemically important overnight – he said and added that the public would expect some reaction from the authorities. Hence, he added, work on CBDC is one of the Fed’s priorities.
The race is on
Interestingly, so far the US authorities have not rushed to work on CBDC. Russia, China, Sweden, Australia and the European Central Bank have already taken concrete steps to launch their digital currencies. It is possible that Beijing will release the digital yuan as early as this year.
But Powell reassures – the United States will always have an advantage over other countries due to the status of the dollar as the world’s reserve currency.