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US Fed Chair: Better To Get it Right Than to Be First with CBDC

Powell argued that the U.S. already has a “safe and active dynamic domestic payment system.”

Jerome Powell

The Fed's chairman, Jerome Powell, said that The United States of America will not be issuing a digital dollar until all questions around a potential central bank digital currency (CBDC) have been solved. 

Furthermore, Powell said that he is not concerned that other countries would have an advantage in issuing CBDCs.

Talking at a panel on cross-border payments hosted by the International Monetary Fund on Monday, Powell told:

"We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done. [...] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.”

Powell clarified that “getting it right” means that the United States will not only see at the possible benefits of a CBDC but also the risks- especially the fact that the U.S dollar is the globe’s reserve currency.

The official noted that countries around the world have their own way to deal with CBDC. 

Powell disputed that the main focus for the U.S. would be discovering “whether and how a CBDC could enhance an already secure and active dynamic national payment system.” He added:

"Unlike some jurisdictions, here in the United States we continue to see strong demand for cash. Moreover, we have robust and mature financial and banking sectors, and we have a highly banked population, so that many, although not all, already have access to the electronic payment system.”

The chairman of the federation demanded that the bank would decide to declare a digital dollar until the risks related to cyberattacks, financial stability, privacy, and security related to the CBDC have been resolved. He said: 

"In addition to assessing the benefits, there are also some quite difficult policy and operational questions. [...] Just to mention a few, I would mention the need to protect a CBDC from cyber attacks and fraud; the question of how a CBDC would affect monetary policy and financial stability; and also, how could CBDC prevent illicit activity while also preserving user privacy and security.”

Powell’s comments come between several global jurisdictions actively exploring and managing CBDCs. For example,  Russia and Japan are among the latest countries to jump on the CBDC bandwagon,  while China and Sweden began testing their forthcoming digital currencies in 2020.

Despite the technology's increasing popularity across the globe, citizens in the U.S. are also suspicious about the concept of the digital dollar. More than 50% of Americans are denied on the U.S. Fed issuing such an asset,  according to a recent survey,  In late September, the Federal Reserve Bank of Cleveland announced details f the Fed’s continuing research into a potential digital dollar.

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