US Federal Reserve Chairman Jerome Powell spoke about the current landscape of digital currencies (CBDCs) in the country during the virtual seminar on digital payments organized by the International Monetary Fund (IMF).
On virtual seminar Organized by the International Monetary Fund (IMF), one of the most important American organizations in the economic and financial field, the president of the FED, Jerome Powell, assured that the FED is committed to the study of a CBDC to complement the dollar, as well as its potential benefits and risks. Powell noted that the dollar, his national currency, is the main reserve currency worldwide, and that there are currently about $2 billion in physical bills and coins in circulation, of which at least 50% remains in circulation internationally.
Powell did not confirm the definitive issuance of a CBDC for the United States, but he did emphasize that the nation is not interested in becoming the first to launch a digital currency issued by the central bank, but is instead focused on studying “very carefully” the technologies necessary for this innovation to develop correctly.
“We have a responsibility to the United States and the world to ensure that any steps we take with a digital currency are taken in a secure manner.”
As reported by the Bit2Me team during the month of August, the governor of the FED Board, Lael Brainard, announced that the entity was carrying out in-depth studies on the technology blockchain, as a basis for analyzing the possible creation of a hypothetical digital currency (CBDC) for the dollar. Although Brainard did not affirm that the entity will issue a digital dollar, he did make it clear, at that time, that the entity is focused on studying and researching a theoretical digital currency, to understand the implications that this may have within the country's financial and economic system.
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A growing trend
Although 80% of the world's central banks are studying the possibility of issuing a digital currency (CBDC), Powell stressed that great caution and caution must be exercised in the face of this new form of money. The FED chairman warns that the United States has not made any decision on whether or not it will issue a CBDC, but that the possible arrival of stablecoins non-sovereign and international in character, such as the project Pound Facebook, and the launch of CBDCs by other nations, are driving the entity to study and analyze new technologies.
On several occasions, technology and blockchain experts, such as Chris Larsen, CEO of Ripple, have criticized the United States' position on the development of new technologies, arguing that this nation could fall behind China and other countries if it does not adopt new technological developments.
Global Technology Overview
Likewise, Satya Marar, a policy analyst at the Reason Foundation and Young Voices, says the United States could lose the battle as a technological leader to China, especially if it nationalizes fifth-generation (5G) mobile networks in the country. article, Marar argues that China has an extraordinary advance in the development of patents on these networks, and that its technological giant Huawei has more than 75 billion dollars in subsidies and will be responsible for building the 5G network in the United Kingdom. Thus, if the world increasingly depends on a telecommunications network controlled by the Asian nation, American technologies will be at a great disadvantage, which will lead the country to lose part of its global leadership, argues the policy analyst.
The importance of getting it right, according to Powell
Even though current technological development is driving more nations to adopt new technologies and CBDCs, as a way to protect and guarantee an important role in innovation, Jerome Powell continues to assure that it is vital to study and know all the implications of these developments before implementing them.
“We believe it’s more important to get it right than to be first, and getting it right means we look not only at the potential benefits of a CBDC, but also at the potential risks, and we also recognize the significant trade-offs that need to be made. It needs to be thought through carefully.”
The FED chairman also stated that not only technical and financial aspects should be evaluated in the development of a digital currency (CBDC), but political and social aspects should also be included in its study and analysis. Currently, the Federal Reserve Bank of Boston is conducting research in conjunction with the Massachusetts Institute of Technology (MIT) for the study of digital currency.
Finally, during his speech, Powell also highlighted the potential of the current US financial system, noting that it meets several essential characteristics that may delay the need to launch a CBDC. Powell noted that the United States has “a strong demand for cash, a mature and well-regulated banking sector, and that most people already have access to the electronic payment system.”
Still, Powell acknowledged that improving its cross-border payments system, user privacy and security is essential to the nation's development.
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