A day after declaring a digital dollar a “high priority project,” Federal Reserve Chairman Jerome Powell said this will be “an important year” for the creation of a U.S. central bank digital currency.
Speaking before the House Financial Services Committee on Feb. 24, Powell said 2021 “is going to be the year that we engage with the public pretty actively” on the digital dollar project. He added that there are still significant technical challenges to be met, as well as major policy decisions to be made, before the U.S. decides if it wants to create a digital dollar.
This still leaves the U.S. far behind other economic powerhouses when it comes to the creation of a digital currency (CBDC).
China’s digital yuan is not only fully approved, it is far along in the testing process, having been used by tens of thousands of citizens in lotteries held in several major cities in which merchants were ready to accept the digital currency. And just today, the governor of the Reserve Bank of India said the central bank is “very much in the game” in getting ready to launch a central bank digital currency.
In November, European Central Bank President Christine Lagarde said she had “a hunch” that a digital euro would be coming in two to four years.
Powell’s tune has changed dramatically over the past two years. In November 2019, he called a digital dollar pointless, adding that the country did not need a digital currency. By October 2020, he was saying, “it’s more important for the United States to get [a digital dollar] right than it is to be first, given the dollar’s important role globally.”
That changed again on Tuesday, Feb. 23, when he said during a Senate Banking Committee hearing that the Fed is “looking carefully, very carefully, at the question of whether we should issue a digital dollar,” according to Forbes.
Treasury Secretary Janet Yellen kicked off this week’s digital dollar theme on Monday, telling attendees of the Dealbook/DC Policy Project that it could mean “faster, safer and cheaper payments.” But, she also expressed serious concerns about a CBDC’s impact on banks, financial stability, and money laundering.