"Be Right, Not First," Says Fed Chairman Powell on a Digital Dollar
Chairman of the Federal Reserve explained how the Libra project has reinforced the complexities of launching a national digital currency.
- The U.S. government is still on the fence about launching a CBDC.
- Around 80% of the central banks around the world are considering launching CBDCs, but Powell advises moving slowly with such decisions.
- The Libra project revealed the need for improved cyber security and customer protection for a national digital currency.
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“We have not made a decision to issue a CBDC,” said Fed Chairman Jerome Powell in his speech during today’s International Monetary Fund (IMF) event devoted to the cross-border payments.
The Slow and Careful Rollout of America’s CBDC
The Fed’s chair was questioned about whether Facebook’s attempt to launch Libra’s in 2019 accelerated the discussion of central bank digital currencies (CBDCs). Powell responded by outlining America’s vision for such financial technologies.
Roughly 80% of the central banks globally are considering the idea of introducing CBDCs. However, the costs and benefits of such actions need to be evaluated carefully by each jurisdiction, according to Powell.
Though the world is hurtling towards a new form of money, each country will have a different approach.
.@federalreserve’s Powell: For the US, it's more important to get digital currencies right than to be the first. Cybersecurity and preventing fraud are key. https://t.co/EFHUv21SWz #CrossBorderPayments #IMFmeetings pic.twitter.com/mlPVHTr40m
— IMFLive (@IMFLive) October 19, 2020
The chairman highlighted that despite productive conversations between the U.S., other central banks, and the Bank of International Settlements (BIS), there is a lot of work to be done and many more discussions with all the stakeholders before the launch of an American CBDC.
One of the reasons for the slow rollout is the fact that USD is the world’s principal reserve currency.
Powell also pointed out that the U.S. CBDC will only complement the existing payments system and recommend other countries to adopt a similar vision. He stated that the demand for cash in America is still high. The financial and banking sectors are strong, and most of the country’s citizens already have access to digital payments.
In regards to Libra, Powell stated that the project brought up the importance of improving customer protection, cybersecurity, and privacy of cross-border payments. He added that Libra made regulators think more about risk management and compliance expectations for new financial technologies.