Fed Chairman Jerome Powell has ruled out the possible issuance of a CBDC in the United States, adding to growing distrust of central banks globally.
Powell, who has chaired the US Federal Reserve since 2018, has closed the door to the creation of a digital dollar under his administration. During the presentation of the semi-annual monetary policy report to Congress, Powell assured that There will be no digital dollar as long as he is in charge of the central bank.
His recent remarks, which put an end to years of speculation and study, coincide with a general decline in enthusiasm among central banks around the world for central bank digital currencies (CBDCs).
TRADE WITH STABLECOINSThe end for CBDCs?
Powell has been categorical in his rejection of the issuance of a CBDC for the dollar in the United States, indicating that as long as he is in charge, such a currency will not be issued.
In her testimony In the semi-annual report, Powell answered affirmatively to Senator Bernie Moreno's question on whether the United States would refrain from introducing a digital currency under his leadership. With this affirmative answer, Powell has put an end to a long period of uncertainty and debate about the possible adoption of a digital dollar, marking a clear divergence from countries such as China, which have been actively exploring this type of digital currency.
Powell's decision is based on the development of the payment system fednow, which was implemented at the end of 2023 and with which the Federal Reserve offers an alternative to users to make instant, secure and accessible payments and transactions without the need for a CBDC. However, its rejection of these digital currencies also coincides with a series of concerns raised by the federal administration and several state administrations.
Trump bans the issuance of a CBDC for the dollar
Jerome Powell's stance is echoed in statements by President Donald Trump, who has also expressed strong reservations about CBDCs. Trump has even signed an executive order banning the creation of a digital dollar in the United States, arguing that this type of currency would give the government absolute control over personal finances, affecting the financial freedom of Americans.
For their part, other states, such as South Dakota, Oklahoma, Nebraska, Alabama, Florida, Indiana, Missouri, and Utah, and a few more, have also joined this concern for the financial freedom and privacy of citizens, developing new legislation that is flatly opposed to the implementation and use of CBDCs within their respective jurisdictions.
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Global disinterest in CBDCs
The Fed's rejection of issuing a CBDC also coincides with the Disinterest of central banks for this type of digital currencies. A recent report by the Official Monetary and Financial Institutions Forum (OMFIF) reveals that the attractiveness of central banks around the world for CBDCs is waning.
According to poll carried out on 34 central banks, approximately 31% have postponed their plans to implement a CBDC due to regulatory concerns, privacy issues, and technical challenges that these currencies pose. Other 15% of banks surveyed showed less interest compared to the previous year, the report noted. Thus, although the organization emphasized that the advances in CBDCs, in key aspects such as offline payments, privacy and interoperability are notable, it also highlighted that privacy and user experience have become a crucial challenge for the design of these digital currencies.
For its part, the Fed, as central banks reconsider their stance on CBDCs, is exploring alternatives such as its FedNow payments system to improve transaction efficiency and promote financial inclusion. In addition, Trump’s executive order also aims to regulate cryptocurrencies, especially stablecoins, in order to assess their potential impact on financial markets.
Thus, the decision recently announced by the Fed president, coupled with the executive order signed by Trump at the end of January, opens the door to the possibility of exploring the innovation of digital assets as alternative solutions to improve financial efficiency.
