US Fed Chair Jerome Powell Rules Out The Private Sector in Creation of a Digital Dollar

the Fed Chair has come out in favour of central banks, arguing that they should take the lead when it comes to monetary policy.

Jerome Powell, the U.S Fed Reserve Chairman, has said that private entities should not be part of the creation process of a digital dollar. Appearing before the House Financial Services Committee on June 17, the Fed Chair highlighted that monetary policy functions should be left to the central banks regardless of the operating ecosystems.

On the digital dollar progress, Powell noted that the Fed owes it to the public to be up to speed with developments in the space. Consequently, the financial watchdog has emphasized understanding the intricacies of digital assets to evaluate their public good.

Private Entities Ruled Out of Digital Dollar Creation

Earlier this year, a digital dollar proposition was launched by the former CFTC Chairman, Christopher Giancarlo, together with other notable stakeholders in the financial services industry.

This recommendation had proposed private entities and the Fed to work together towards creating the digital dollar. According to the suggested layout, this digital currency would leverage the current U.S banking system to provide two-tiered services with the Fed's backing.

This issue was raised as a question to Powell by Rep. Tom Emmer (R-MN) hence triggering the clarification on monetary policy functions. In his opinion, a collaboration with the private sector would invalidate the idea of the public good:

“The private sector is not involved in creating the money supply. That's something that the central bank does. […] I don't [think the public would welcome the idea that private employees who are not accountable solely to the public good would be responsible for something this important.”

Notably, Powell also addressed some shortcomings with the proposition of a digital dollar. One of the main concerns is striking a balance in what would be a fair oversight of the digital dollar.

According to Powell, there are a lot of questions when it comes to transactional privacy, which means it would be difficult to cap where the Fed's control ends. However, he was keen to reassure the House Financial Services Committee that the Fed will not shy away from something beneficial to the world's reserve currency, U.S. dollar.

China on Sunrise Phase

As the U.S continues to debate on the value proposition of a digital dollar, China has already launched a pilot for the digital renminbi (RMB). This initiative had been in the works for around five years and is quite promising, given China's extensive use of mobile app payments such as Alipay and WeChat.

It, therefore, follows that a complete sweep up of fiat money within China's economy in replacement with the digital yuan could soon be a reality. Despite this progress, China is not guaranteed to displace the U.S dollar as a reserve currency given its substantial market dominance. Also, the Euro is still significantly ahead of the CNY in FX markets.

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Edwin Munyui
Edwin Munyui
Edwin is a FinTech enthusiast with a particular interest in blockchain technology and cryptocurrencies. He has worked as an author in the blockchain space since 2017 and enjoys creating content that both crypto veterans and newbies can understand. His simple writing style and financial market knowledge have made him a reputable fundamental and technical analyst with the ability to handle any topic around blockchain and crypto over the years.

[Alert] Use the author's self-conducted information at your own risk, do you own research, never invest more than you are willing to lose.

[Disclosure] The published news and content on BitcoinExchangeGuide should never be used or taken as financial investment advice. Understand trading cryptocurrencies is a very high-risk activity which can result in significant losses. Editorial Policy \\ Investment Disclaimer

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