Risks related to cyber-attacks, financial stability, privacy, and security must be resolved for the US to consider the digital dollar says, Powell
The US Federal Reserve Chairman, Jerome Powell, said that the US will not be issuing a central bank digital currency until the Fed resolves all questions surrounding a potential virtual currency. Speaking at a panel on Cross-Border Payments — A Vision for the Future — organised by the International Monetary Fund, Powell claimed he is not worried about other countries benefiting from the first-mover advantage with regards to CBDCs.
“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 explained.
He elaborated by outlining that the US is not only interested in understanding the potential benefits of digital currency but also estimating the potential risks also. Powell added that the US must be cautious given the fact that the USD is the world’s reserve currency.
Countries across the globe have their own domestic and international aspirations behind issuing a CBDC, the official acknowledged. However, America’s main focus would be to determine if and how a CBDC could improve an already safe and active dynamic domestic payment system, Powell stated.
Explaining the robust nature of the present system, he said “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.”
Powell outlined cyber-attacks, financial stability, privacy, and security as the most concerning CBDC associated risks. He added that the central bank will not make a decision on the digital dollar until these issues have been resolved. With their undeniable benefits, CBDCs also raise some quite difficult policy and operational questions, he explained.
” 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 said.
Powell’s remarks come amid an increasing number of global jurisdictions taking a keen interest in CBDCs. While Russia and Japan are the most recent countries to comment on exploring digital currencies, Sweden and China are already testing their CBDCs.
Written by Harshini Nag