The United States will not be issuing a digital dollar until the Federal Reserve resolves all questions around a potential central bank digital currency, or CBDC, according to the Fed’s chairman, Jerome Powell.
Powell claimed that he is not worried about other countries having a first-mover advantage when it comes to issuing CBDCs.
Speaking at an Oct. 19 panel on cross-border payments hosted by the International Monetary Fund, Powell said:
We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done […] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.”
Powell elaborated that “getting it right” means that the U.S. is not only looking at the potential benefits of a CBDC, but also the potential risks — particularly given the fact that the U.S. dollar is the world’s reserve currency.
The official noted that countries around the globe will have their own motivations for issuing a CBDC. He contended that the main focus for the U.S. would be determining “whether and how a CBDC could improve an already safe and active dynamic domestic payment system.” Powell continued:
Unlike some jurisdictions, here in the United States we continue to see strong demand for cash. Moreover we have robust and mature financial and banking sectors, and we have a highly-banked population, so that many, although not all, already have access to the electronic payment system.”
The Fed chair emphasized that the bank will not make a decision on issuing the digital dollar until it resolves CBDC-associated risks involving cyber attacks, financial stability, privacy, and security. He stated:
In addition to assessing the benefits there are also some quite difficult policy and operational questions […] Just to mention a few, I would mention the need to protect a CBDC from cyber attacks and fraud; the question of how a CBDC would affect monetary policy and financial stability; and also how could CBDC prevent illicit activity, while also preserving user privacy and security.”
Powell’s remarks come amid a number of global jurisdictions like actively exploring and piloting CBDCs. Countries like Russia and Japan are among the latest countries to jump on the CBDC bandwagon, while jurisdictions like China and Sweden began testing their forthcoming digital currencies in 2020.
Despite the technology’s growing popularity across the globe, citizens in the U.S. are also skeptical about the idea of the digital dollar. According to a recent survey, more than 50% of Americans are opposed to the U.S. Fed issuing such an asset. In late September 2020, the Federal Reserve Bank of Cleveland revealed details of the Fed’s ongoing research into a potential digital dollar.