The Federal Reserve President Jerome Powell said that potential central bank digital currency must coexist with cash and other sources of cash in traditional payment processes.
The chairman of the Fed made closing remarks at a conference organized by a community of central bankers from around the world called by the BIS Committee on Payments and Market Infrastructure.
“The Covid crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments,” Powell said. “And as this conference amply demonstrates, despite the challenges of this last year, we still have been able to make important progress.”
The Fed’s Interest in a “Digital Dollar”
Federal Reserve Chairman Jerome Powell previously told Congress that the Fed is debating whether to issue a digital US currency.
Powell told Congress that a digital currency created by the Fed is a “top priority” but that there are “technological and policy concerns” about a digital US dollar.
Powell emphasized that the US would not have to be the first to issue a digital dollar since it is the world’s reserve currency, but it must “get it right.”
Central bank digital currency (CBDC) is a form of money that exists solely as a result of the adoption of electronic technology, and does not include the usage of physical currency or currency notes.
Bitcoins and other decentralized cryptocurrencies differ from centralized cryptocurrencies in that the network is controlled by a single central agent. The underlying infrastructure, though, is identical.
Since the dollar serves as the world’s reserve currency, Powell stated that it is more important to ensure the project’s consistency than for the US central bank to be the first to launch a digital version of the currency.
The Fed is yet to decide whether or not to launch a digital currency. CBDC, also known as a digital dollar, is an official, central bank-issued digital currency. While CBDCs may be involved, blockchain-based payment systems are not needed.
A central bank digital currency, to coin a new term, is a type of currency created and managed by a national central bank, such as the Bank of England.
It is all electronically, rather than the real currency that is normally used in the form of paper cash and coins. As Powell points out, such plans are currently being considered by a number of central banks around the world.