Cryptocurrency stablecoins can become systemic interest overnight, he says Federal Reserve of the United States Chairman Jerome Powell, which is why the Fed is determined to get its own central bank digital currency right.
CBDCs are the banking industry’s answer to cryptocurrency stablecoins. Although often hosted on the blockchain, they share little philosophical equality with their decentralized counterparts. CBDCs are supervised by the banks that issue them and are regulated under the laws of their respective jurisdictions.
To speak an interview Along with Yahoo Finance, Powell said advances in technology had allowed private entities to create their own money – and history had shown this to be something to be avoided:
“Technology has made this possible and in fact private sector actors can create the equivalent of digital money. We know that in the past with private sector money, sometimes the public just sees it as money, and at some point they discover that it is not money. That is a very bad thing that we must avoid. “
Powell can envision a scenario where stablecoins are suddenly relevant to a large enough number of people to become “systemically important” overnight. He said the Fed still doesn’t know how to respond to such an event, admitting that it doesn’t even fully understand the risks yet:
“[Stablecoins] could become systemically important overnight and we are not starting to put our arms around the potential risks, how to manage those risks – and the public will expect us to do so, and have every right to do so. expect […] It has a very high priority. “
As high a priority as launching a CBDC, the Fed will not fall into the trap of trying to be the first. Russia, China, Sweden, Australia and the European central bank have everything steps taken to establish a CBDC (some are further on than others), but according to Powell, the US will always have a first-mover advantage because of the dollar’s status as the world’s reserve currency:
“Since we are the world’s reserve currency, we actually think we need to get this right and don’t feel the urge or need to be the first. In effect, this means that we already have a first-mover advantage because we are the reserve currency. “
Powell’s laid-back approach to the prospect of a “CBDC divide” emerging between world powers is not shared by everyone. In October a senior Japanese finance minister warned that China’s digital currency could overshadow world nations’ fiat money if the digital yuan gains a first-mover advantage.
The president of the Chinese Finance Association rejected this idea, adding that the digital yuan was not like Libra, and that no intention of replacing international currency.
Any potential “FedcoinIs still years away, said Powell, who is determined to get it right rather than fast – even if it means losing ground to private sector money in the meantime.
“We are determined to get this right rather than quickly, and it will take time […] Measured in years instead of months. “