In creating a cross-border digital currency for the Federal Reserve System (FRS), it is important not to be ahead of the curve with its release, but to do so with the right approach, said the head of department, Jerome Powell.
Participating in a panel discussion on digital payments organised by the International Monetary Fund, he stressed:
„It is more important for the US to do everything right than to be the first“.
Powell explained that the right approach is to examine not only the potential benefits of the CBDC, but also possible risks. According to him, „important compromises“ will need to be considered carefully.
„We have a responsibility to both the country and the world to Bitcoin Trader ensure that any steps taken for the US digital currency are safe,“ Powell said.
The head of the Federal Reserve has identified some policy and operational issues that need to be fully analysed before the CBDC is released:
How to protect digital currency from cyber attacks, counterfeiting and fraud?
What impact will the CBDC have on monetary policy and financial stability?
How can we prevent illegal activities with CBDC while ensuring the confidentiality and security of users?
Powell said that although the Fed has not yet decided to issue digital currency, it is actively pursuing case studies, both independently and in partnership with other CBDCs and the Bank for International Settlements.
The head of the Fed reminded that the Federal Reserve Bank of Boston is working with the Massachusetts Institute of Technology to develop a hypothetical CBDC.
„These types of experiments help us understand the risks and benefits of the CBDC by measuring trade-offs between different designs and system mechanisms and evaluating security risks,“ Powell added.
Previously, the Federal Reserve, the ECB, the Bank of England, the Bank of Canada, the Bank of Japan, as well as the Central Bank of Sweden and Switzerland, together with BIS, reported on the CBDC’s founding principles and key features. The agency’s working group was established in January 2020.
Translated with www.DeepL.com/Translator (free version)