Federal Reserve Chairman Jerome Powell has provided an update on the progress of a digital dollar. He confirmed that it is a “very high priority project” for the Fed, and agrees with U.S. Treasury Secretary Janet Yellen on the benefits of issuing a digital dollar.
The Fed Is Looking Carefully at a Digital Dollar
Fed Chair Jerome Powell testified on Capitol Hill before the Senate Banking Committee Tuesday, the first of two days of congressional testimony. He is speaking before the House Financial Services Committee on Wednesday.
Senator Bill Hagerty asked him about a digital dollar, referring to U.S. Treasury Secretary Janet Yellen’s remarks on the subject made on Monday. She said: “I think it [the digital dollar] could result in faster, safer, and cheaper payments, which I think are important goals.”
Powell began by confirming, “We are looking carefully, very carefully at the question of whether we should issue a digital dollar.” He pointed out that other central banks around the world are also looking into issuing digital currencies because “The technology now enables us to do that, and also enables private sector actors to create their own digital quasi-money type of instruments.”
Noting that “There are significant both technical and policy questions to do with how we would go about doing that,” the Fed chair elaborated:
I would say that we are committed to solving the technology problems and consulting very broadly with the public in very transparent way with all interested constituencies as to whether we should do this.
He stressed: “We are the world’s reserve currency, and we have the responsibility to get this right. We don’t need to be the first. We need to get it right.”
Emphasizing that “This is something we are investing time and labor in right across the Federal Reserve System,” Powell reiterated that “We are doing research here at the Board.” Furthermore, he noted that the Federal Reserve Bank of Boston has partnered with MIT to explore this area.
The Federal Reserve chairman then agreed on the benefits outlined on Monday by Treasury Secretary Yellen. He added that the digital dollar “could help with financial inclusion as well.”
Nonetheless, Powell cautioned: “At the same time you want to avoid creating things that might be destabilizing or might draw funds away from the banking system … We want to be careful about what the implications are.” The Fed chair concluded:
[It’s a] very high priority project for us.
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