- US Federal Reserve Chair Jerome Powell announced that unbacked cryptocurrencies have not offered much in terms of public interest.
- The US Central banking system therefore remains undecided on a central bank digital currency.
- Stablecoins and the digital dollar was a key point of discussion for the Federal Reserve.
Central bank digital currencies (CBDC) and stablecoins took center stage in recent months. Governments and regulators from around the world showed interest in “digital fiat” and CBDCs. The US Fed Chair revealed that the central bank’s stand on CBDCs is undecided.
Also read: Bitcoin Price: Whales flood exchanges with BTC, what's next?
US Fed Vice Chair stresses the role of the digital dollar
Lael Brainard, the US Federal Reserve Vice Chair recently commented on the digital dollar at a conference hosted by the Bank Policy Institute in New York. Brainard argued that the central bank needs to explore questions related to transfer limits and interest-bearing accounts. A key concern surrounding CBDCs is that direct banking customers using the digital dollar could negatively influence the standing of private banks in the US economy.
Brainard believes stablecoins, whose value is pegged to other assets, are the most potentially risky of cryptocurrencies if not properly regulated. They are an area of concern for the US Central Banking system. Federal Reserve Vice Chair for Supervision Michael Barr emphasized that the Congress needs to act on stablecoin regulation sooner or later.
Powell remains undecided on CBDCs
Jerome Powell revealed that the US Central Banking system is currently undecided on CBDCs. No decision has been made yet and unbacked cryptocurrencies have not offered much in terms of public interest for payments. In his speech Barr had asked the Congress to pass much-needed legislation. Barr was quoted as saying:
I believe Congress should work expeditiously to pass much-needed legislation to bring stablecoins, particularly those designed to serve as a means of payment, inside the prudential regulatory perimeter.
Powell said the US Federal Reserve needs clear support for the executive branch and the Congress, for CBDCs. Privacy protection is one of the key issues and the Fed’s role is to analyze tradeoffs and challenges on a possible CBDC. Since stablecoins and CBDCs purport to be money, Powell believes these need to be regulated.
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