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Fed Considers Its Own Digital Currency

Powell sees no rush, though China's central bank is forging ahead on development
By Bob Cronin,  Newser Staff
Posted Sep 22, 2021 7:30 PM CDT
Powell Sees No Rush on Digital Currency
Federal Reserve Board Chair Jerome Powell testifies before the Senate Banking, Housing, and Urban Affairs Committee in July.   (AP Photo/Jose Luis Magana, file)

(Newser) – The Federal Reserve expects to issue a paper soon addressing whether it should go ahead with a digital currency of its own. The central bank has been looking into the issue, with the Boston Fed and MIT combining on a study that will precede the paper, CNBC reports. The advantages, Lael Brainard of the Boston Fed said, include being able to provide services for unbanked people and putting payments in the hands of people quickly during crises. "We think it’s really important that the central bank maintain a stable currency and payments system for the public's benefit," Brainard said. "That's one of our jobs."

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Other nations' central banks are moving in the same direction, but Fed Chaiman Jerome Powell said there's no need to rush the decision. "I don’t think we're behind," he said Wednesday. "I think it's more important to do this right than to do it fast." Brainard supports the idea, but not all Fed officials do. Others elsewhere say the US is at risk of falling behind; China has been working on developing a digital currency for its central bank for a decade, while the Fed's upcoming paper won't actually make a recommendation. Its issuance will "begin a major public consultation on central bank digital currencies," Powell told Congress.

The rest of the world will be able to test China's system next year during the Winter Olympic Games in Beijing, per Time. Foreigners already can use the digital version of China's paper currency, which doesn't require merchants or consumers to have an internet connection, bank account, or credit. Although the dollar seems safe as the world's reserve currency, China could put itself in a leadership position on regulating digital currency. "While America led the global revolution in payments half a century ago with magnetic striped credit and debit cards, China is leading the new revolution in digital payments," a Brookings Institution fellow wrote. (Read more digital currency stories.)

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