Fed Is In No Rush With Decision on Digital Dollar - Governor
Following speculations about a potential upcoming digital version of the US dollar, an official with the US Federal Reserve revealed yesterday that the central bank is indeed experimenting with distributed ledger technology (DLT), although she stressed that no decision has been made to actually introduce it.
The admission that the Fed is indeed working on an experimental version of a digital dollar came in a speech delivered on Thursday by Fed Governor Lael Brainard at a conference sponsored by the Fed’s regional branch in San Francisco. In the speech, Brainard revealed that the project has been in the works “for the last few years” and that it is overseen by a “multidisciplinary team” at the bank.
However, Brainard stressed that the US central bank has not yet decided on whether this new form of the dollar will ever be introduced. According to him, a significant policy process would be required to consider the issuance of a CBDC (central bank digital currency), along with extensive deliberations and engagement with other parts of the federal government and a broad set of other stakeholders.
“There are also important legal considerations […] The Federal Reserve has not made a decision whether to undertake such a significant policy process, as we are taking the time and effort to understand the significant implications of digital currencies and CBDCs around the globe,” the Governor added.
She said that the US central bank is in no rush with their work, and that they are “taking the time and effort to understand the significant implications of digital currencies,” including the implications of other CBDCs developed around the world.
Multiple countries are working on digital versions of their own fiat currencies, with China arguably leading the race with their digital yuan proposal. As reported today, the Chinese central bank is set to massively expand the scope of its digital yuan pilots.
Discussions about the potential for a digital version of the US dollar has been reignited in the wake of the COVID-19 pandemic, with proponents arguing it could, among other things, speed up stimulus payments from the government, which in the US have been sent out as physical checks.
Touching on the issue of more modern forms of payment, Brainard also said that a US CBDC could serve as a “complement to cash and other payments options,” noting that the central bank “remains committed to ensuring the public has access to a range of payments options.”
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