US Federal Reserve (FRS) Chairman Jerome Powell hinted that the agency is exploring the idea of a digital dollar. In the long term, this initiative will allow the country’s central bank to take control of digital assets.
According to the head of the FRS, during 2021, representatives of the public and lawmakers will have to start discussing this topic.
During a hearing before the House of Representatives Financial Services Committee on February 24, 2021, Powell admitted that the digital dollar project raises many questions, which will give lawmakers the opportunity to discuss the concept with the public to find common ground.
“This year we will actively engage with the public, including some of the public events that we are currently working on. While we are dealing with technical issues, as well as cooperating and sharing the results of work with the central banks of other states, which are also working on similar projects. «
Powell said the Fed is making headway in addressing the technical issues surrounding the digital dollar. He added that the agency is also in talks with other central banks exploring or issuing Central Bank Digital Currencies (CBDCs).
When asked why the Federal Reserve needs to consult with lawmakers to launch the digital dollar, Powell explained that the well-being of other markets is important to the US government, especially when it comes to creating the digital dollar.
“For this we may well need permission from the legislature. It will become clear when we see which direction we are going. «
It should be recalled that last year, when Powell addressed his fellow panellists during the launch of the International Monetary Fund (IMF) cross-border payments program, he explained that the digital dollar would improve the country’s payment system by modernizing its payment infrastructure.
Powell also mentioned that the digital dollar will help bridge the gap between people who have access to financial services and those who do not, as e-currency reaches consumers who are not covered by financial institutions. When asked why the Federal Reserve has still not decided whether or not to use the digital dollar, Powell replied:
“We have a lot of work to do and also to hold extensive public consultations with all stakeholders before making such a decision.”
While many central banks around the world have already adopted digital currency policies, Powell argues that the Federal Reserve is not committed to doing so first.
“I think it’s more important for the US to get it right than to be the first. That rightly means that we have to examine not only the potential benefits of CBDC, but also the potential risks, as well as realize important trade-offs that need to be carefully assessed. «
For the US Federal Reserve and the central banks of other countries, the main goal of the digital dollar launch is the need to limit the risks associated with non-cash payments.
If the digital dollar is institutionalized, the Federal Reserve will strengthen its credibility and presence in the digital payments environment, which is expected to reduce the risk of individuals becoming completely dependent on private payment systems.