Fed's Powell Says in Letter to Congress Fed Not Creating Digital Currency
November 21 2019 - 12:39PM
Dow Jones News
By Michael S. Derby
Federal Reserve Chairman Jerome Powell said in a letter to a
congressman on Tuesday that the U.S. central bank doesn't currently
have plans to launch a digital currency and sees the adoption of
something like it difficult in the U.S.
Mr. Powell's comments come from a letter to Rep. French Hill
(R., Ark.). In that letter, Mr. Powell wrote that the Fed is
monitoring issues around central bank digital currencies "closely"
but added "we are not currently developing a central bank digital
currency."
Mr. Powell explained in the letter that "characteristics that
make the development of central bank digital currency more
immediately compelling for some countries differ from those of the
U.S." For one thing, Americans remain more committed to cash than
other nations going down the digital money path, he wrote.
Other nations also have less reliable payment systems, Mr.
Powell added. "The U.S. payments landscape is highly innovative and
competitive, with many such options available for consumers," the
Fed leader wrote.
And then there are issues with rules and regulations. "In the
U.S. context, issuing a central bank digital currency for general
use would raise important legal, monetary policy, payments policy,
financial stability, supervision and operational questions that
need to be considered carefully."
The rise of all the various private cryptocurrencies have put
official central bank digital currencies on the table. Some other
nations are moving closer to their adoption. For example, there's
Sweden's E-krona, which that nation's central banks said "would
give the general public access to a digital complement to cash,
where the state would guarantee the value of the money."
Advocates for central bank digital currencies see many benefits.
Payments could be transacted more quickly. Also, a central bank
offering would potentially have more credibility than highly
volatile private-sector offerings, which are very difficult to use
for real-world things like buying and selling services and
goods.
Central bank digital-currency supporters also see upsides to
central bank monetary-policy objectives. Official digital money
could come with accounts directly at the central bank, of the sort
only now available to banks. Instead of relying on banks to pass on
changes in interest-rate policy, some believe the Fed could take
its interest-rate tools directly to the consumer level via these
sorts of accounts.
Mr. Powell noted in the letter that "while the Federal Reserve
fosters the safety and efficiency of the payment system by offering
interbank payment services, direct provision of payment services to
households and businesses would represent a major change."
Interest in a Fed digital currency has waxed and waned over
recent years. In 2017 then-New York Fed leader William Dudley said
it was an option that was on the table for the central bank, even
as he later lamented what he saw as "speculative mania" in
private-sector offerings.
Chicago Fed leader Charles Evans recently weighed in on the
merits of a central bank digital currency. Like Mr. Powell he
doesn't see a Fed digital dollar as imminent, even as there remain
important issues to explore.
"A central bank digital currency could conceivably address some
of the barriers to widespread use," Mr. Evans said in a speech on
Nov. 14. "A central bank's nationwide reach could spur widespread
adoption, and government backing could ensure the currency would be
default free."
In a statement, Rep. Hill said "I'm pleased to learn that the
Federal Reserve is carefully exploring the costs and benefits of
developing a U.S. digital currency." Adopting such a currency
"would have far-reaching implications on every aspect of America's
monetary policy and requires a deep level of analysis to ensure
proper implementation."
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
November 21, 2019 12:24 ET (17:24 GMT)
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