The Federal Reserve is pushing ahead with its study on the introduction of its own digital currency and will shortly publish a paper on the subject, Chairman Jerome Powell said on Wednesday.
No decision has been taken on the matter, he added, saying the Fed does not feel pressured to do something quickly while other nations move forward with their own projects.
“I think it’s important that we get to a place where we can make an informed decision about it and do it quickly,” Powell said at his press conference after the meeting. “I don’t think we’re behind. I think it’s more important to get it right than to do it quickly.”
Powell added that the Fed was “working proactively to consider whether and in what form a CBDC should be issued”.
The introduction of a digital dollar has been on the Fed’s radar for more than a year, and it announced in May that it would look into the matter further, with a paper to follow.
The Boston Fed took up the project and, together with MIT, took an initiative to examine whether the central bank should introduce its own digital coin to make the payment system more effective. Fed Governor Lael Brainard has been a strong supporter of the effort, though several other officials, including Regulatory Vice Chairman Randal Quarles, have expressed doubts.
Proponents like Brainard say the benefits of having a central bank digital currency are getting payments to people quickly in times of crisis and also providing services to people without a bank account.
“We believe it is very important that the central bank maintains a stable currency and payment system for the public good. It’s one of our jobs, ”said Powell. Pointing out “transformational innovation” in digital payments, he said the Fed was continuing to work on the matter, including its own FedNow system, which is expected to go live in 2023.
The test for a CBDC is, he said, “there are clear and tangible benefits that outweigh any costs and risks.”
However, a bigger drum beat has developed as central banks, especially China, pushed ahead with their own plans and began the early stages of implementation.
Concerns have even been raised that the dollar’s position as a global reserve currency could be challenged if the Fed does not act more aggressively.
Powell noted the dollar’s position in the world and said the Fed was “in a good place” to make a decision about adopting its own digital currency. He expressed concern about the regulatory landscape and said the Fed will likely need Congressional approval should it choose to proceed.
“When it comes to public money, we need to make sure that there is adequate regulatory protection, and today in some cases it really doesn’t exist,” said Powell.
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