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  • L Misthos and M Bacina

US Federal Reserve Chairman Hints at CBDC Action

Updated: May 3

The US Federal Reserve has shown an intention to provide guidance on the potential issuance of an Central Bank Digital Currency (CBDC). Speaking at a Federal Open Market Committee (FOMC) press conference last week, Chairman Powell indicated the US Federal Reserve is looking at both technological and policy considerations to cover all bases with respect to CBDC issuance. The Chairman said:-

we're working proactively to evaluate whether to issue a CBDC and if so in what form

It appears the Federal Reserve understands the myriad of currencies and innovation that is occurring outside of the regulatory framework and is determining whether the issuance of a CBDC is in the best interest of US citizens.

The comments are a repeat of the Chairman's sentiment earlier this year where he labelled the US CBDC a "high priority project", however, reaffirmed that it is not a project the Federal Reserve is likely to rush. When asked whether he thought the US was falling behind, Powell said:

I don't think that we're behind, I think it's more important to do this right than to do it fast. We are the worlds reserve currency.

A significant number of other countries, including Switzerland, Saudi Arabia and the United Arab Emirates and most recently China, have already moved to develop and implement their own CBDC.

The Boston Federal Reserve is spearheading the technology side of the initiative in a partnership with the Massachusetts Institute of Technology ('MIT') to evaluate the benefits of a CBDC; benefits like providing faster international transactions and opening services to the unbanked.

Despite the Federal Reserve indicating it wishes to release a paper relating to CBDC's towards the end of the year, Powell expressed concerns with the current regulatory landscape:

Where the public’s money is concerned, we need to make sure that appropriate regulatory protections are in place, and today there ... are not in some cases.

(You can listen to the full press conference here, or skip to 50:28 for Powell's take on CBDC's)


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