U.S. Federal Reserve Chairman Jerome Powell spoke on 60 Minutes about the possibility of issuing a digital dollar.
60 Minutes correspondent Scott Pelley said that China recently developed its own central bank digital currency (CBDC). In light of this, he asked Powell whether the U.S. is working on its own native “digital dollar.”
The Fed Chairman responded by saying that the Federal Reserve (Fed) is currently evaluating it.
According to Powell, the Fed is considering whether a digital dollar would actually benefit the public in an advanced economy where fast digital payments already exist. He also said the Fed would have to involve Congress and the American public in the process.
Understanding the technology for policy
However, Powell stated that his institution is responsible for understanding the technology behind a digital dollar. “How would it work? What would the features of it be?” Powell posited. “There are many subtle, and difficult policy choices and design choices you have to make.”
Powell also said that software development was taking place at the Fed Board. He also mentioned that other regional Federal Reserve’s were also participating in research projects. One such project is research underway at the Boston Fed. Based on that preliminary research, Bloomberg revealed that financial institutions were skeptical of the positive impact of a digital dollar. The American Bankers Association specifically said it could set payments back several years.
The Importance of the digital dollar
Powell said that other developed countries are experimenting with CBDCs and that the Fed is working alongside central banks. He mentioned that the use of cash had fallen dramatically in these other countries. But, in the United States, “Americans still like to use cash,” Powell said. He highlighted this as another reason why the Fed would consider the situation in the US as its primary motivation.
The Fed Chairman also reflected on the potential negative consequences of issuing a digital dollar. Despite the Biden administration being wary of the digital yuan, Powell stressed that the dollar was too important to rush. “We do not need to be the first ones to do this,” he emphasized. “We want to get it right and that’s what we’re going to do.”