“It’s Better To Get It Right Than Be First,” says Fed Chairman Jerome Powell

At the virtual seminar conducted by the International Monetary Fund (IMF), Jerome Powell, chairman of the US Federal Reserve, explained the Fed’s plan about central bank digital currency (CBDC).

While discussing the implications of CBDC in cross-border payments, the Fed chairman has acknowledged digital currency has the potential to transform the current financial system. To ensure user security and privacy, the US government will explore the feasibility of central bank digital currency.

Powell, however, pointed out the US did not require CBDC immediately due to the high demand for cash, and there is a well-organized network of the electronic payment system. In the case of CBDC’s issuance, it will not replace cash, but it will complement physical money. In his whole speech, he emphasized that “it’s more important to get it right than to be first.”

Potential Risks Linked with CBDC

It needs to be focused more on the potential risks attached to the launch of digital currency at the state level. Besides merits, the authorities must also address demerits and risks linked with a CBDC. “We have a responsibility to the U.S. and to the world that any steps with a digital currency be taken safely,” Powell added.

He explained three risk areas that should be addressed before issuing a CBDC. First, prevention from fraudulent activities and cyberattacks is a must thing. Second, it can challenge current monetary policy and financial stability. Third, user privacy is a very important thing to consider while dealing with illicit activities.

The Fed is working with private firms over development designs and research programs. According to the Fed’s chairman, the US “must be at the forefront of research.”

In the past, some reports claimed the Federal Reserve had started working over the digital dollar. But today talk of central bank head shows they are still not confirmed about launching digital dollar.

In order to curb the dominance of the US dollar, China is working extensively over the creation of digital yuan. China’s central bank has reached the final steps of digital yuan’s launch as it has rolled out various pilot programs.

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