- Federal Reserve chairman Jay Powell yesterday said that the Fed was looking “very carefully” at a digital dollar
- Powell added his backing for the development of a CBDC but added that there was pressure to “get it right”
- Countries like China are leading the way in national digital currencies
Federal Reserve Chair Jerome Powell said yesterday that the central bank is looking “very carefully” at the prospect of issuing a digital dollar. Powell made the comments while testifying on Capitol Hill before the Senate Banking Committee, where he also labelled a CBDC a “high priority project”. The U.S. is far behind the likes of China when it comes to development of a sovereign digital currency, although the government finally seems to be getting on board with the concept, with Treasury Secretary Janet Yellen also adding her support for the notion on Monday.
“We Need to Get it Right”
Powell made the comments on a digital dollar while answering a question from Senator Bill Hagerty:
We are the world’s reserve currency. We don’t need to be the first – we need to get it right. But this is something we’re investing time and labour in right across the federal reserve system.
Powell was also wary about the potential implications of a digital dollar on the U.S. banking system:
It does hold out the prospect of the things that you mention…it could help with financial inclusion as well. At the same time you want to avoid creating things that might be destabilizing or that might draw funds away from the banking system.
Powell ended by saying that a digital dollar remains a “high priority project for us”, which will be good news for supporters of an American CBDC.
Yellen Lends Her Weight
The potential for development of a U.S. national digital currency had already gained some traction on Monday when new Treasury Secretary Janet Yellen told a New York times-hosted virtual conference that, “It makes sense for central banks to be looking at” issuing sovereign digital currencies, adding that a digital dollar could “result in faster, safer and cheaper payments” which would benefit those currently outside the traditional banking system.
CBDC development ramped up in 2020, with many European countries undergoing in-house testing and China rolling out real world tests of a digital yuan in Shenzhen. The U.S. has been criticized for dragging its heels on the matter, with some high profile figures warning that foreign digital currencies could kill U.S. dollar dominance on the global stage.