Federal Reserve Chair Powell emphasizes that it’s important to get a Cross Border Digital Currency (CBDC) right, rather than be first. Federal Reserve Chair Powell said this during a panel hosted by the International Monetary Fund.
“We do think it’s more important to get it right than to be first and getting it right means that we not only look at the potential benefits of a CBDC, but also the potential risks, and also recognise the important trade-offs that have to be thought through carefully,” he said.
“In addition to assessing the benefits – and there may well be benefits – there are also some quite difficult policy and operational questions that need to be thoroughly evaluated,” Powell continued.
Powell cited the example of the need to protect the digital currency from cyber attacks, counterfeiting, and fraud. He also noted how it would be important to gauge how a CBDC could affect monetary policy and financial stability.
Powell also asked how a CBDC could “prevent illicit activity while also preserving user privacy and security”. He mentioned that, while the Fed has made no decision on issuing a digital currency, it is an active participant in research with other central banks, the Bank for International Settlements (BIS), as well as conducting its own research.
Many central banks are examining the possibility of issuing their own digital currencies. The BIS and seven central banks, including the Federal Reserve and the Bank of England, released a report exploring how a CBDC could work in a bid to catch up with China’s work on a CBDC.
Central Banks took the issue of CBDC in earnest following Facebook’s announced plans to create Libra, as well as monetary policy related to Covid-19 to optimize the delivery of their aid.
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