Development of digital currencies: How central banks set the course?

How Jerome Powell and Other Central Banks Set the Course for Digital Currencies

Fed Chair Jerome Powell, in a discussion about Central Bank Digital Currencies (CBDCs), emphasized the importance of cautious analysis and assessment of implementing digital currencies. Decisions made by central banks, such as the Federal Reserve, are crucial for the global financial system.

The Need for Developing Appropriate Regulations

Powell also highlighted the necessity of implementing robust regulations to address concerns regarding the impact of digital innovations on financial stability. At the same time, international cooperation and unified standards are emphasized as pivotal in responding to challenges related to digital currencies.

Research and Experiments in the Field of CBDC

The Fed assures that it is not close to recommending or adopting a CBDC that would monitor users. Many countries are exploring the possibilities and consequences of introducing central bank-issued digital currencies. In Hong Kong, the central bank has launched a CBDC project to support tokenization for interbank settlements.

Experiments in BRICS Countries

BRICS countries are working on a payment system based on blockchain technology. Meanwhile, the Philippines aim to complete their CBDC project supporting interbank settlements by the end of the year.

Biden Orders CBDC Analysis

President Joe Biden signed an executive order directing the Fed to explore the possibility of introducing a CBDC, reflecting the essence of modernizing the U.S. payment system. The repeated emphasis on a cautious approach to CBDC development by the Federal Reserve, as well as focusing on analysis, experiments, and collaboration with international partners, is a key element of the strategy.

It is important for central banks, including the Federal Reserve, to continue dialogue with stakeholders, conduct research, and evaluate potential CBDC models. The final decision regarding a potential digital currency must be supported by in-depth research, taking into account both the benefits and risks associated with introducing a digital dollar or any other CBDC.