In the letter from the 19th of November 2019, responding to questions asked at the end of September by rep. French Hill and rep. Bill Foster, the boss of FED – Jerome Powell – said that the institution managed by him recognizes the efforts of other nations to investigate the prospects of digital currency issuing. But will the central bank of the US itself think of issuing an digital dollar?
In a letter to Powell, Hill and Foster have expressed their concern about the potential risk for the dollar, which would be the issuance of a global digital currency by another country or private company (it’s not hard to guess they meant, China for the former or Facebook for the latter). Both politicians asked the central bank if it was exploring such possibilities on its own.
FED and the digital dollar
While experts wonder what benefits would a digital dollar bring to the US, Powell said, that FED has no plans concerning issuing of such. Even more so, according to him, a Digital US currency would not benefit the US in any way it could benefit nations.
For example – as he says – in some nations, “a quick migration from cash [to e-Payments], has been observed, while the demand for cash remains high in the US”. Similar payment systems might be faulty and slow in some jurisdictions, while the digital flats can offer an improvement in quality for consumers. The chair of FED still thinks that Payments in the USA are “innovative and competitive”.
In further parts of the letter, Powell has said that introduction of a digital dollar would raise “important” questions concerning laws, monetary policy, financial stability, regulation, and financial operations. He means questions like whether a “general purpose” CBDC would be classified as a legal tender and what would “rights and duties” of participants of such a system be?
So a digital dollar will never be created?
The matter digital dollar may also raise privacy and security concerns. The use of the new technology would also mean having to decide whether the digital currency generates interest and whether its supply will be limited.
Generally speaking, Powell has come to a conclusion that FED “has not identified any potential material benefits of a general purpose CBDC in implementation of monetary policy in relation to our currently existing tools.”