Fed Governor Voices Caution on Central Bank Digital Currencies.
Federal Reserve board governor Jerome Powell took critical aim at the concept of a central bank-issued digital currency, this occurred during a work event in the round tables focused on the blockchain and the future Of financial markets, this meeting took place at the Yale University Law School.
In this vein, after discussing blockchain technology more broadly – echoing past remarks and research publications from the US central bank Governor Powell honed in on the subject of the so-called CBDC. Several institutions of its kind, especially the Bank of England, have pursued possible applications in the area in the past year and a half. Central banks in China, Sweden and Singapore, among others, have also investigated this use case.
Then, in statements, Powell raised questions about the technical and privacy issues he argued could impede such an effort, positing that such a system “would be a global target for cyber attacks, cyber counterfeiting, and cyber theft”.
What he went on to argue, these efforts could crowd out private-sector approaches to new payments tool.
It is this order of ideas, Powell, he told the audience. “Indeed, I would expect private-sector systems to be more forward leaning than central banks in providing new features to the public through faster payments systems as they compete to attract retail customers. A central bank issued digital currency would compete with these and other innovative private-sector products and may stifle innovation over the long run.”
Also, he said, central banks may want to consider private approaches, therefore “Any central bank actively considering issuing its own digital currency would need to carefully consider the full range of the payments system and other policy issues, which do seem substantial, as well as the potential societal benefits,” he said. “To my mind, they should also consider whether the private sector can substantially meet the same needs.”
It is important to note that this speech comes months after Federal Reserve governor Lael Brainard discussed the central bank’s research into blockchain. Meanwhile, Fed chair Janet Yellen, too, has remarked on the tech twice since last fall, calling it an “important technology” during an appearance in January this year.
Therefore, there is a lot of importance by the US Federal Reserve Institution to study Blockchain’s technology and its possible applications. New announcements are expected.
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