In the wake of a high-profile public test of China’s digital yuan via public lottery, U.S. Federal Reserve Chairman Jerome Powell spoke about central banks digital currencies and said… go slow.
“I actually do think this is one of those issues where it’s more important for the United States to get it right than it is to be first, given the dollar’s important role globally,” Powell said on an International Monetary Fund (IMF) panel on Oct. 19. “Getting it right means that we not only look at the potential benefits of a CBDC, but also the potential risks and also recognize the important trade-offs.”
Saying it is important to think the issue through carefully, he added, “we have a responsibility both to the U.S. and the world that any steps taken towards a U.S. digital currency be taken safely.”
Still Powell’s views on CBDCs is evolving. He told the IMF:
I feel that we have an obligation to stay on the forefront of policy and technological innovation and developments as regards to payments, cross border payments, CBDCs—all of those things.
Last November, Powell told a pair of congressmen that he felt “it is not yet clear what additional value a general purpose CBDC could provide in the U.S.”
Today, he noted that 80% of the world’s central banks are at least exploring the idea of issuing a CBDC.
“Our main focus is on whether and how a CBDC could improve an already safe, effective, dynamic, and efficient domestic payments system,” said Powell. “Unlike some jurisdictions here in the United States, we continue to see strong demand for cash. Moreover, we have robust and mature financial and banking sectors, and we have a highly banked population.”
Last December, Treasury Secretary Steven Mnuchin told the House Financial Services Committee that he did not foresee a CDBC in the U.S. until 2025 at earliest, in large part because it isn’t necessary. Mnuchin cited conversations with Powell in coming to that conclusion.
China, on the other hand, is speeding towards a digital yuan renminbi with its DC/EP digital currency.
Following the wide roll-out of the test CBDC in August, the city of Shenzhen on Oct. 12 held a lottery giving 50,000 winners 200 yuan ($30) out of a total of 10 million yuan ($1.5 million) worth of the DC/EP.
Winners were required to use it or lose it at nearly 4,000 participating merchants by Oct. 18.
In the end, 47,573 winners successfully downloaded the digital red envelope wallets, spending about 8.8 million digital yuan, according to local reports. In addition, winners added a total of more than 900,000 more funds to their wallets while spending their awards.
In all, 62,788 transactions were made, totaling 8.764 million ($1.3 million) yuan.