Federal Reserve Chairman Colin Powell has written to two members of the House of Representatives saying the Fed has no immediate plans to issue dollar-denominated currencies. In a November 19 letter to Bill Foster and French Hill, members of the House Financial Services Committee, Mr Powell said: “For some countries, The development of the central bank’s digital currency is urgent, but the United States is different. ”
That’s because cash is still widely used in the U.S., payment networks are numerous and the banking sector is diversified, Powell said.
“It’s not clear what additional value a common central bank digital currency (CBDC) can provide in the U.S.,” Powell said. But he said the Fed was watching closely to see if other countries’ efforts to introduce CBDC affected the US.
Earlier, Mr Foster and Mr Hill asked the Fed to outline its thinking on the central bank’s digital currency in the light of private sector developments, including proposals by Facebook (197.51, -1.81, -0.91%) to establish a global digital payment network.
Powell’s letter also lists a range of regulatory and policy issues that need to be addressed before the U.S. launches dollar-based CBDC. This includes whether cryptocurrencies issued by central banks should be considered legal tender.
Another policy issue, Powell said, is potential data storage and network security requirements for storing all payment records involving CBDC.
He said that while the Fed had not developed its own cryptocurrency, it was conducting “small-scale, research-oriented technology experiments” to better understand the technologies that could be used to support CBDC.
John Collins, a partner at FS Vector, a fintech consultancy, says the Fed has been studying digital currencies for years, but Powell’s report on technology experiments and policy issues marks a step forward.
“They’re trying to start raising big legal issues about digital dollars, which should give Congress something serious to deal with, including the Federal Reserve and other agencies,” Collins said. ”
Both Mr Foster and Mr Hill said they were encouraged by the Fed’s continued exploration of US digital currencies.
“This decision will have far-reaching implications for all aspects of U.S. monetary policy and requires in-depth analysis to ensure proper implementation,” said Hill, a senior member of the Subcommittee on National Security, International Development and Monetary Policy.
Mr Foster said CBDC had the potential to be “the most efficient, secure and ultimately private form of digital payment processing” while cracking down on illegal financing.
“My main concern is that we will be caught off guard by the rapid development of other countries, ” he said. These developments could put our economy at a competitive disadvantage and threaten the dominance of the dollar. “