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US Fed: CBDC is „high priority“ to combat risks of private sector money issuance

US Fed: CBDC is „high priority“ to combat risks of private sector money issuance

Jan 15, 2021 Bitcoin von admin

The US Federal Reserve needs its own digital currency to protect itself against a possible proliferation of stablecoins overnight, says Fed Chairman Jerome Powell.

US Federal Reserve: CBDC is „high priority“ to counter the Financial Peak risks of private sector money issuanceNOTISH

Stablescoins can become systemically important overnight, says US Federal Reserve Chairman Jerome Powell, which is why the Fed is determined to get its own digital currency from the central bank.

The CBDCs are the banking sector’s answer to stablecoins. Although they are often hosted in the blockchain, they share little in terms of philosophical parity with their decentralized counterparts. CBDCs will be supervised by the issuing banks and will be regulated according to the laws of their respective jurisdictions.

In an interview with Yahoo Finance, Powell said that advances in technology have allowed private entities to create their own money – and that history has shown that this was something to be avoided:

„Technology has made it possible and effective for private sector players to create the equivalent of digital money. We know that in the past, with private sector money, the public sometimes only thinks of it as money and at some point discovers that it is not money. This is a very bad thing that we need to avoid. ”
Powell can imagine a scenario where stablecoins are suddenly relevant to a large enough number of people to become „systemically important“ overnight. He said the Fed still doesn’t know how to respond to such an occurrence, and admitted that he is nowhere near understanding the risks:

„[Stablecoins] can become systemically important overnight and if we don’t start thinking about the potential risks, how to manage those risks – the public expects us to, and has every right to expect that […] It’s a high priority. ”
No matter how high a priority a CBDC launch is, the Fed will not fall into the trap of trying to be the first. Russia, China, Sweden, Australia and the European Central Bank have all taken steps to launch a CBDC (some are ahead of others), but according to Powell, the US will always have the lead because of the dollar’s status as a global reserve currency:

„Since we are the world’s reserve currency, we really think we need to do it right and we don’t feel the need to be the first. In fact, that means we already have a pioneer advantage because we are the reserve currency. ”
Powell’s relaxed approach to the prospect of an emerging „CBDC gap“ among the world’s superpowers is not shared by all. In October, a leading Japanese finance minister warned that China’s digital currency could eclipse the cash of the world’s nations if the digital yuan gets the upper hand.

The president of the Chinese Financial Association rejected that idea, adding that the digital yuan was not like the pound and had no intention of replacing international currencies.

Any potential „Fedcoin“ is still years away, according to Powell, who is determined to do it the right way, rather than fast – even if it means losing ground to private sector money in the meantime.

„We are determined to do this the right way, not quickly, and it will take some time […] It will be years, not months.