Steven Mnuchin, the US Treasury Secretary said that he and Jerome Powell, the Federal Reserve Chairman, think the US doesn’t need to create a digital currency soon.
This is what Mnuchin declared on Thursday, at a Washington House Financial Services Committee hearing:
“Chair Powell and I have discussed this — we both agree that in the near future, in the next five years, we see no need for the Fed to issue a digital currency.”
This comes while other world’s central banks, like the People’s Bank of China, are looking forward to creating digital currencies. Besides, the European Central Bank is analyzing what developing such a project could bring to the private sector, where cross-border payments need to be made faster and at lower fees.
The Fed is Studying Costs of Benefits that a Digital Currency Could Bring
Mnuchin said he talks with Powell every week and that they had a discussion on Wednesday, at the Financial Stability Oversight Committee meeting, and another one on repo markets on Thursday, the week before. The Fed is not yet working to develop a digital currency, but it’s looking at what the benefits and costs of such a move would be. At least this is what Powell said to the Representative and Arkansas Republican French Hill in a letter.
Hill previously wrote a letter to Powell in September, asking about the benefits and national security implications of developing a digital currency. This is what Powell wrote in his November 19’s letter:
“We are carefully monitoring the activities of other central banks to identify potential benefits that may be relevant in the U.S. context.”
Prior to developing a digital currency, it’s important that the Fed addresses the possible operational risks such as monetary policy, cyberattacks, user transparency, and financial stability.
Mnuchin’s Stand on Facebook’s Libra
Mnuchin started talking about digital currencies after a lawmaker asked him about Facebook and China developing their own digital tokens. Facebook took policymakers and regulators by surprise when it announced earlier this year that it will develop a digital currency called Libra. This is what Mnuchin had to say about the social networking company’s project:
“I’m fine if Facebook wants to create a digital currency, but they need to be fully compliant with bank secrecy and anti-money laundering rules. In no way can this be used for terrorist financing.”
Many have expressed their concerns that Facebook’s Libra may be used to finance terrorists and criminals, even if the company explained it wants to give more financial opportunities to poor people and underbanked regions. Mnuchin also said Facebook’s progress is slow because he had a dozen meetings with representatives from the company, meetings in which regulatory matters have been discussed.