making progress on technological issues. We think it’s important that any potential CBDC be a complement to, and not a replacement of, cash and current private sector digital forms of the dollar. We’re working hard to evaluate the benefits and risks of a CBDC, as well as the potential use cases for it.
Powell also emphasized the importance of collaboration with other central banks and international organizations in the development of a CBDC. He stated that the Fed is actively participating in discussions with the Bank for International Settlements and other central banks on the topic.
The Fed Chairman’s comments come as other countries, such as China, are already testing their own CBDCs. The digital yuan has been in development for several years and is currently being tested in various cities across China.
The potential benefits of a CBDC include increased financial inclusion, faster and cheaper cross-border payments, and improved monetary policy transmission. However, there are also concerns about privacy, cybersecurity, and the potential impact on the banking system.
Powell acknowledged these concerns and stated that the Fed is taking a cautious approach to CBDC development. He emphasized that any potential CBDC would need to be designed with strong privacy protections and cybersecurity measures in place.
Overall, Powell’s update on the Fed’s CBDC work indicates that progress is being made, but that there are still many policy and technical issues to be addressed before a digital dollar becomes a reality.
