US Fed Chair Says Private Entities Should Not Help Design Central Bank Digital Currencies
Private companies don't need to build central bank digital currencies, the head of the U.S. central bank said on Wednesday.
Federal Reserve chairman Jerome Powell told the House Financial Services Committee that the idea of a digital dollar - a blockchain-based version of the current world reserve currency - is complex and taken seriously by the Fed, but the idea also needs further investigation before you can build and implement it. When asked by Rep. Tom Emmer (R-Minn.), Powell replied that private companies played no role in shaping a digital dollar.
"I think central banks have to design that," he said. "The private sector is not involved in creating money, the central bank does."
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Emmer specifically asked about a recommendation from the Digital Dollar Project, launched earlier this year by former Commodities Futures Trading Commission chairman J. Christopher Giancarlo, chief innovation officer Daniel Gorfine, and accenture director David Treat. The project proposed to issue a digital dollar from the Fed, but it was developed in partnership with the private sector and is accessible through a two-tier banking system that is similar to today's US one.
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Powell said the general public may not be receptive to the idea that private employees are responsible for the money supply because they are not accountable to the "public good."
Nevertheless, the idea is apparently being examined. A group of central banks have come together to discuss and better understand the concept, as well as assess the impact on financial inclusion and cyber security concerns, he said.
Related topics: Fed chair says private companies should not help design central bank digital currencies
"If this is something that will be good for the US economy and the world's reserve currency, the dollar, we have to be there and understand it first and best," said Powell. "So we're working hard on it."
The chairman also briefly raised concerns about the Fed's ability to control a hypothetical digital dollar and said it was "a very difficult problem" to find a balance between too much knowledge of an individual's transactions and too little knowledge . Powell didn't have enough time to fully answer the question.
Powell acknowledged concerns about implementing a token version of the dollar and the impact of waiting too long for another currency upgrade.
See also: Digital dollar project calls for a two-tier distribution system in the first white paper for US CBDC
"It is our duty to understand it well and not wake up one day and realize that the dollar is no longer the world's reserve currency because we have just missed a technological change," he said. "So we're not going to let that happen, but at the same time there are some very serious questions that need to be answered before we can implement a central bank digital currency."
Bradley Keoun contributed to the reporting.
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