A central bank digital currency (CBDC) would help boost the long-term strength of the U.S. dollar, the chair of the Federal Reserve said Friday (June 17).
In his welcoming remarks at a Federal Reserve Board conference in Washington, D.C., Jerome Powell said that in light of the rapid growth of stablecoins and crypto assets, his organization is studying whether an American CBDC would improve on what he called “an already safe and efficient” payments system.
“As the Fed’s white paper on this topic notes, a U.S. CBDC could also potentially help maintain the dollar’s international standing,” Powell said. “As we consider feedback from the paper, we will be thinking not just about the current state of the world, but also how the global financial system might evolve over the next 5 to 10 years.”
Meanwhile, Powell said the Fed is “acutely focused” on returning inflation to the organization’s 2% objective.
“Meeting our dual mandate also depends on maintaining financial stability,” he said “The Fed’s commitment to both our dual mandate and financial stability encourages the international community to hold and use dollars.”
Powell’s comments came two days after the Fed raised interest rates by 0.75 percentage points, and one day after a banking trade group called on European Union officials exploring the creation of a digital euro to proceed with caution.
Read more: Bankers Urge EU to Proceed With Caution on Digital Euro
As PYMNTS reported, the Institute of International Finance (IIF) said its members want “a clear qualitative and quantitative impact assessment of the range of possible designs of a digital euro,” especially consideration of “various risks … to financial stability,” according to Jessica Renier, managing director for digital finance for the group.
The IIF’s 450 members include commercial and investment banks, payments networks, accountancy groups, crypto exchanges and the International Monetary Fund.
Renier noted that the Fed’s white paper on CDBC focused on “whether” a national digital currency is a good idea, while the EU seems more concerned with “how” a CBDC would work.
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