The United States is not in a rush to issue a digital dollar until the Federal Reserve resolves all questions around a potential CBDC, according to the Fed’s chairman.
January 15, 2021 | AtoZ Markets – Unlike other major world powers, the US is making slow progress with a central bank digital currency (CBDC) and for good reason, Federal Reserve Chairman Jerome Powell said during a virtual event.
Due to the possible threat a digital dollar may pose to actual US dollar, it seems that the agency is not extremely keen on moving ahead quickly into a CBDC program.
Better to get it right than to be first with CBDC
The Fed is not giving up on CBDC development and Powell stated that the Fed has already allocated a significant amount of resources to research on this area. It will be several years before the US will see a digital currency trial or roll out, as the US does not “feel an urge or need to be first” in this space.
The US dollar is the reserve currency of the world, and as such, Powell says that the US already has “first-mover advantage”, despite the crumbling US dollar market and struggling economy.
However, it was forced to take a position on digital dollar development as the US private sector is more than capable of creating money and distributing it for mass public consumption.
Fed is now focusing more on regulating stablecoins
This was most apparent after a Digital Dollar Foundation was established last year, together with a proposal for a digital dollar design and infrastructure. Powell and the Fed were quick to lambast the private sector for interfering in the creation of money, something that should be relegated exclusively to the Fed and public sector.
The Fed is now focusing more on regulating stablecoins, which have become increasingly popular over the years. Facebook’s Libra, (now rebranded to Diem) announced its plans to laucnch its USD-pegged stablecoin this month, which prompted US regulators once again to accelerate plans to provide rules for companies offering stablecoins in the US market.
“They could become systemically important overnight. We don’t begin to have our arms around the potential risks and how to manage those risks. The public will expect that we do and has every right to expect that. So that’s something that we’ve been working on with our colleagues around the world,” he said.
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