This posting in Banking Dive is nothing new in reality, since we have been covering the subject of CBDCs and various statements from different folks in and around the Fed now for quite some time. However, since Fed Chair Powell made a statement on Wednesday about CBDCs, it is worth spending a minute on it again for those readers not up to speed on the Fed’s less than enthusiastic stance on the subject.
In effect, Powell reiterated what has been stated by the Fed for the past year, which is the ’need to do it right, not fast’ line, while we await a paper from it on research findings that was supposed to have already been released. Powell also said (again) that the Fed would not unilaterally move forward with a CBDC, but insisted that the Executive and Legislative branches would have to be involved.
‘The Fed will seek to build a consensus with the Biden administration and members of Congress before it makes any move on creating a central bank digital currency (CBDC), Federal Reserve Chairman Jerome Powell made clear at a Wednesday press conference following a two-day Federal Open Market Committee meeting….Powell said in May that the Fed would deliver a white paper on the topic this summer to kick off a public conversation. Later, he suggested the report might be released this month. In an update at the press conference, Powell said the CBDC report would arrive “soon.” ‘
Powell then went on to address questions around the lagging U.S. response to the CBDC question, as opposed to the BIS push for innovation in the space and multiple other sovereign governments giving it a go. He also spoke to the FedNow project, which is not really a relevant thing but the press conference did cover several topics, including the expected tapering coming out of the FOMC meetings. The bottom line is we need to see whatever paper is coming out to get the real skinny on what the Fed might actually be planning to do in X timeframe.
‘Powell rejected the notion that the U.S. was not keeping up with other countries in considering a CBDC. “It’s more important to do this right, than to do it fast,” Powell said, echoing a stance he espoused last October and again in March. “We are the world’s reserve currency, and I think we’re I think we’re in a good place to, to make that analysis and make that decision.” …Part of the analysis includes the Federal Reserve Bank of Boston working with the Massachusetts Institute of Technology (MIT) on the technology aspects of creating a CBDC. With that input from MIT, the white paper “will be the basis for a period of public engagement — engagement with many different groups including elected officials around these issues,” Powell said…. “The ultimate test will apply when assessing the central bank digital currency and other digital innovations is: Are there clear and tangible benefits that outweigh costs and risks?” he said.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group