Federal Reserve Chairman Jerome Powell addressed the House of Representatives’ Financial Services Committee on Tuesday. When asked about digital currencies, Powell admitted that the Libra project had sparked some excitement in the Fed last year.
Jerome Powell, the current chairman of the Federal Reserve, said this in response to Illinois Congressman Bill Foster’s question about the progress being made on the issue of central bank digital currency (CBDC). Furthermore, Powell made statements that would allow for an increasingly larger scope of private crypto-currency transactions, including data protection,: which is a reversal of previous policy.
Question about the digital dollar
The discussion between Foster and Powell focused on the feasibility of a digital dollar, the competitive pressures that the Fed would face from China’s central banks as well as from private companies such as Facebook and how such an introduction of such digital currency could would assume.
During the discussion, Powell acknowledged: “Libra was a bit of a wake-up call that digital currencies would come quickly and that they could come in ways that are widespread and systemically important”. The ultimate goal, Powell said, is to “digitize the dollar one day”.
“We’re working hard on it, we have a lot of projects going on and a lot of effort is being made right now“. – Jerome Powell
But Powell emphasized that the Fed has not officially begun to create or introduce a digital dollar: “We have not decided to do so. There are many questions that need to be answered about a digital currency for the United States, including questions about security and privacy. We will work all of this out and do this work thoroughly and responsibly.”
Powell advocates private crypto-currency transactions
Apart from the considerations on the digitization of the dollar, Powell made contrary statements in a previous statement on U.S. policy regarding privacy and digital currencies. He argued that the government has no interest in knowing everyone’s payments and highlighted certain advantages of anonymous crypto transactions. He made these statements in connection with China’s plans to introduce a national currency. For example, Powell explained: “The idea of having an accessible cash book where one knows the payments of all parties is not particularly attractive in the context of the United States”.
The comments mark a turning point in the Trump administration’s general hostility to pseudonymous crypto-currencies. US Treasury Secretary Steven Mnuchin has been critical of crypto-currencies like bitcoin in the past. According to Mnukhin, they are often misused for illegal activities.