Key Takeaways:
– Federal Reserve Chair Jerome Powell refutes the possibility of the bank developing a digital currency.
– His statement comes in response to a question during a Senate hearing on Tuesday.
– Powell assures that such development will not take place under his term as chief.
– Powell’s assurance reveals the bank’s stand following several years of speculation.
– The Fed released an extensive study in 2022 examining both the merits and demerits of digital currencies.
End of the Road for Fed’s Own Digital Currency
Federal Reserve Chair Jerome Powell put an end to lingering speculations on Tuesday. He declared that the Fed would not be pursuing the development of its own cryptocurrency under his leadership. This announcement came during a Senate Banking, Housing, and Urban Affairs Committee hearing.
Committed to a No-Crypto Path
Sen. Bernie Moreno from Ohio posed a question to Powell during his semiannual testimony on monetary policy and regulation. Moreno asked if he could be assured that there would be no Federal Reserve digital currency during Powell’s term. Powell gave a clear “Yes” in response, pleasing Moreno.
“It’s extremely important,” said Moreno, acknowledging Powell’s reassurance. “Your statement makes me very happy.”
A Long-Standing Issue
The digital currency issue has piqued the Fed’s interest for over four years. An in-depth study was released by the bank in 2022 that explored both the pros and cons of such an introduction, but offered no final verdict. Several officials over the years have shown apprehension, doubting the need for a Central Bank Digital Currency (CBDC). They cited worries over privacy and other concerns.
Further, Powell emphasized that the creation of a CBDC would need an act of legislation from Congress. This move appears less probable with the Republican majority overseeing both chambers in Washington, D.C. Powell’s term as head of the Federal Reserve is set to end in May 2026.
Alternative Plans in Play
While shutting down the idea of a central digital currency, the Federal Reserve has initiated its FedNow payments system. This move essentially deals with several issues that a Fed-backed cryptocurrency was envisaged to tackle.
Sen. Moreno encouraged Powell to continue their work on the FedNow project, aiming to make 24-hour money transfers more universally accessible. This initiative is seen as an alternative path for the bank, leapfrogging the need for digital currency.
In Summary
With Powell’s recentConfirmation, the Federal Reserve has made its stance clear. As long as Powell serves as the chief, the bank will not venture into the realm of digital currencies. Regardless of the extensive research conducted over the past years, and despite the digital forays of its international counterparts, the Fed chooses to remain on the sidelines in the cryptocurrency race.
Instead, its focus seems to be on developing its payments system, FedNow. This alternative approach aims to tackle the same set of issues a digital currency might address, without providing the assortment of challenges a CBDC would undoubtedly bring. With this strategy, the Federal Reserve aims to stay relevant in the ever-evolving digital financial landscape without stepping into the volatile world of cryptocurrencies.