Fed chief: ‚CBDCs must co-exist with cash‘
Federal Reserve Chairman Jerome Powell says CBDC would have to co-exist with cash, referring to the BIS.
Federal Reserve (Fed) President Jerome Powell made remarks on CBDC at the Committee on Payments and Market Infrastructures (CPMI). At the virtual conference, which was also attended by the European Central Bank (ECB), the Fed chief reaffirmed that the central bank is „conducting experiments with CBDC“ to investigate the Crypto Bank feasibility of such a project. For this purpose, they are also working with experts from the Massachusetts Institute of Technology (MIT).
Powell also referred to a report by the Bank for International Settlements (BIS). In it, the financial institution set out three core principles that digital central bank currencies would have to fulfil. For example, the introduction of a CBDC should not harm current monetary and financial stability. Furthermore, the currency’s features should promote innovation and efficiency. The third core characteristic was particularly emphasised by the Fed chief in the virtual meeting.
One of the three key principles highlighted in the report is that CBDCs must co-exist with cash and other forms of money in a flexible and innovative payment system.
Jerome Powell, Chairman of the Federal Reserve Board
Fed’s prerequisites for CBDCs
At the end of February, the central bank had already defined requirements that a CBDC would have to fulfil in order to be introduced in the USA. According to the Fed, clear policy objectives are key to the design of a CBDC. Broad stakeholder support is necessary to make the social and legal changes possible. These are necessary to improve the way American society thinks about money. A strong legal framework must provide the legal basis for the issuance, distribution, use and destruction of a CBDC, while a robust technology framework must ensure security and efficiency. The final prerequisite would be acceptance and adoption by the population. Powell also hinted at possible public trials planned for this year.