US Federal Reserve (FED) Chairman Jerome Powell is considering launching a CBDC for the digital dollar, but notes that this new currency must coexist with fiat money; that is, without replacing the form of money we currently know.
During a conference held in Basel, Switzerland, reviewed by Bloomberg, the president of the United States Federal Reserve (FED), Jerome Powell, stated that central bank digital currencies, known as CBDC, must be integrated with the current form of money, the fiat, within existing financial and payment systems.
According to Powell, CBDCs can help countries address several of the existing challenges in cross-border payments, but they should not be developed with the intention of replacing fiat money. Powell has previously stated that the United States can issue a digital currency, but that it should be developed carefully so as not to disrupt its current financial and economic system.
Several of the world's largest and most developed economies are considering creating and launching their own central bank digital currencies, or CBDCs. The goals pursued by these countries through these digital currencies are varied, although they all have in common not to be left behind in terms of technological innovation.
In the case of the United States, the country maintained a rather reserved stance and indicated on several occasions that it was studying a hypothetical digital dollar, and that it had no plans to develop such a currency in the near future. However, a few days ago, both Powell and the current Treasury Secretary, Janet Yellen, indicated that the creation of a digital dollar is being taken as a matter of “high priority” for the country, and that it is possible that the United States will issue a real digital dollar soon. At this time, Powell indicated that the central entity would engage with interested parties on a CBDC for the dollar, possibly within the course of this year.
It may interest you: The digital dollar is a “high priority” for the FED, said Jerome Powell
A topic of global leadership
The United States is a nation recognized for its world leadership in areas such as military and economic wealth, although it has been heavily criticized in technological development. Several experts in the digital industry point out that the country is falling behind in terms of innovation and technological development, due to the refusal of its regulators to promote a clear and precise regulatory framework that allows the growth of the digital industry. cryptocurrencies, and technology blockchain; in addition to the refusal it maintained until recently to issue a digital dollar.
Nations such as China and Russia are already making significant progress in developing their own CBDCs. In the case of China, a CBDC will allow the country to expand and internationalize its national currency, the yuan. The Asian power seeks to compete with the United States in international trade, and considers the development of a CBDC to be a good way to achieve its objectives.
For its part, the United States has been moving forward on this issue much more slowly, arguing that the nation's priority is to evaluate all the incidences and implications of launching a digital currency. In August 2020, the FED indicated that the arrival of a CBDC for the country seemed inevitable, but that this could take up to more than 3 years.
Accelerating digitalization
The arrival and expansion of the COVID-19 pandemic globally accelerated the need for digitalization of nations, Powell said during his participation in the Swiss conference.
For the FED president, the COVID-19 crisis further highlighted “the need to address the limitations of our current arrangements for cross-border payments«; and stressed that despite the limitations, nations had been able to make significant progress.
Powell also noted that the Bank for International Settlements and a group of seven central banks, including the Fed, had been assessing the viability and feasibility of developing CBDCs as a way to help central banks meet their policy objectives.
One of the conclusions that Powell reached during this study is that CBDCs must coexist with fiat money to achieve the creation of a flexible and innovative financial system.
Continue reading: The Boston Federal Reserve will evaluate more than 30 blockchains to test the digital dollar
