Fed Chairman ‘Undecided’ about Merits of Central Bank Digital Currency

Testifying before the Senate Banking Committee today, Federal Reserve Chairman Jerome Powell said that he is “legitimately undecided about whether the benefits outweigh the costs” of creating a central bank digital currency. He emphasized that should the central bank decide to move forward with a CBDC, “we would want very broad support in society and in Congress.”

“Ideally, that would take the form of authorizing legislation, as opposed to a very careful reading of ambiguous law to support this,” Powell said. “It’s a very important initiative and I do think we should ideally get authorization.” He added that the Fed is currently working to “explore both the technology and the policy issues over the next couple of years . . . so that we’re in the position to make an informed recommendation.”

During testimony before the House Financial Services Committee yesterday, Powell said the Fed is at a “critical point” in its deliberations over whether and how to offer a CBDC, and signaled that the agency would publish a report “around early September” on CBDs and other digital payments.

He also discussed the potential for regulating stablecoins under a framework similar to those that apply to bank deposits or money market funds. “We have a tradition in this country where the public’s money is held in what is supposed to be a very safe asset,” Powell told House lawmakers on Wednesday. “We have a strong regulatory framework around bank deposits or money market funds . . . that doesn’t exist for stablecoins. If they are going to be a significant part of the payments universe . . . then we need an appropriate regulatory framework, which, frankly, we don’t have.”