Federal reserve exploring the potential of a digital dollar |
The US Federal Reserve is now exploring the possibility of issuing a central bank digital currency (CBDC).
Federal Reserve and central bank digital currency
Chairman of the Federal Reserve Board, Jerome Powell, replied to US representatives French Hill and Bill Fosters, who had asked whether the Federal Reserve plans to launch a digital currency. The news was reported by financial services reporter Zachary Warmbodt in a Twitter post.
The images shared by Warmbrodt Powell told Congress that the Federal Reserve is studying central bank digital currencies (CBDCs) to see if it is feasible. He stated that although it is not developing a CBDC, it has explored and continues to study the feasibility of such a project.
He explained that the reserve is researching as well as experimenting to gain a more clear understanding of such projects. He noted that the experiments been conducted are very small, but they would assist in understanding the issues faced by central bank digital currencies, as well as the risks that come with them.
He highlighted that the Federal Reserve has answered to numerous legal questions surrounding financial policies before coming to CBDCs. The Federal Reserve addressed payment policies, financial stability among various other issues.
Powell stated that it could be feasible if the CBDC is designed to be “financially transparent” and protects against illegal activity. He then added that such a CBDC would require the agency to track each trade and record it on the blockchain. He said that this creates issues regarding user privacy and data security. He then added that a number of designs need to be considered before a decision could be made.
Rep.Hill responded in an appreciative manner. Hill noted that the decision would have “far-reaching” effects across the American monetary policy.
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