U.S. Federal Reserve Bank Chair Jerome Powell said that the central bank would soon release a paper on a central bank digital currency (CBDC), indicating that the U.S. government is picking up its pace with CBDC research. However, no official decision has yet been made.
The U.S. Federal Reserve Bank is set to release a paper on a central bank digital currency (CBDC), according to Fed Chair Jerome Powell. The Fed Chair was speaking at a news conference, and the remarks have been much awaited as the world waits to see what the U.S. will do with respect to a CBDC.
Ongoing evaluation phase
Powell was keen to stress that no official decision had been made and that the agency was still looking into the benefits and risks. Authorities seem focused on making a stable and trustworthy asset, which has long been touted as an important priority. According to him, they're working proactively to evaluate whether to issue a CBDC and, if so, in what form. The discussion paper that the Fed has been working on will tackle public policy issues. Additionally, it will ask the public and lawmakers for their comments on the paper.
A U.S. CBDC could be the government’s way to handle potential issues with stablecoins. The special asset has been singled out as a key concern for U.S. lawmakers, with the U.S. Treasury working on regulating the industry. Also worth noting is the concern lawmakers across the world have with Facebook’s Diem project, which has had to change its design policy to appease regulators.
One of the reasons why a CBDC has been delayed is because some individuals within the government are worried that the risks may outweigh the benefits. Federal Reserve Governor Lael Brainard has urged the government to at least look into the matter. As countries like China are doubling down on digitizing their economy, the U.S. needs to lead as well, according to the Governor.
US accelerates CBDC research
While many other countries are actively working on a CBDC, with China being the most notable of these, the U.S. has been mostly quiet for many years. It’s only in 2021 that it has picked up its interest in a CBDC, alongside a greater focus on overall regulation. The country has notably vacillated on its decision to work on a CBDC, with officials generally saying that it wants to get the design right - as opposed to rushing it out. Powell does in fact not think that the U.S. is lagging behind.
“It’s more important to do this right than to do it fast. We’re the world’s reserve currency and I think we’re in a good place to make that analysis and to make that decision.” - Jerome Powell, Federal Reserve Chairman
More substantial news on a CBDC could happen very soon, as other agencies prepare regulations. On the whole, the U.S. now seems to be taking the cryptocurrency market very seriously.