Federal Reserve Chairman Jerome Powell: The Digital Dollar Will Integrate With Existing Payment Systems
The concept of central bank digital currencies (CBDC) has become a key topic worldwide. There are many reasons for this: increasing consumer interest, global competition, the impact of coronavirus, and others.
Proactive countries in Asia and Europe have started experimenting with it. Not in the U.S., though. Despite all the benefits surrounding CBDCs, the US has been the most reluctant to commit whole-scale to the project.
Even though the digital economy has forced many people to consider making a digital version of fiat, US Federal Reserve Chairman Jerome Powell points out that these digital caricatures would not ultimately replace cash.
CBDCs Won’t Take Away The Greenback
Powell said that CBDCs wouldn’t push cash into extinction. He commented at a virtual conference hosted by the Committee on Payments and Market Infrastructures in Basel, Switzerland, Bloomberg reports.
According to the Fed boss, CBDCs would have to be integrated into present payment systems alongside cash and other money forms. Powell said his remarks are in line with a Bank of International Settlements (BIS) report. The BIS is known as the “mother of all central banks.” It's a 63-man strong organization of the world's most influential apex banks.
The BIS report revealed that CBDC was gaining traction among central banks. It also looked into their impact on national security and economic well-being.
Speaking on the impact of the coronavirus lockdown on the economy, Powell said world governments are now reassessing the extent to which traditional fiat payment systems can go.
According to their official website, the Boston Federal Reserve has teamed up with Massachusetts Institute of Technology (MIT) researchers to run exploratory experiments on the impacts of a digital dollar on the US economy.
Even though CBDCs will also be in a digital format like Bitcoin and the rest, they would operate under a different ethos. The separating ideal would be that CBDCs would be centrally controlled by the host country's issuing central bank, making them subject to inflationary tendencies, as detractors have pointed out.
Many countries have welcomed CBDCs due to their faster payment protocol and lower transaction cost.
Covid-19’s Disguised Blessing?
Powell's comments on the pandemic forcing governments to look into the mirror are not without reason. The economies of many countries have hit an all-time low due to discontinued economic activities.
Businesses have been forced to shut down, and job cuts have seen many people without a regular paycheck. But even in these trying times, digital payments have boomed.
But China is not the only country that has shown intentions. The North American nation, Commonwealth of the Bahamas, has released a digital version of its Bahamian dollar called the SandDollar. We have also witnessed CBDC testing and exploration from Argentina, Australia, Canada, Sweeden, France, Russia, India, Japan, and The EU.
Even as more countries are announcing interests in creating a digital version of their local currency, the US seems slow to the market. But according to the Federal Reserve Chief, the US is closely looking into the best possible scenario for a tokenized dollar. Powell said a public survey would be carried out before the apex bank would seek congressional approval.