Finally, the Fed is also talking about issuance of digital currencies
This is seen as the Fed trying to keep up with global financial innovation and maintain its position as a superpower U.S. dollar…
|
The US Federal Reserve has just opened the first public discussion and public comment on the issuance of a central bank digital currency (CBDC). This is seen as the Fed trying to keep up with global financial innovation and maintain its position as a superpower U.S. dollar.
According to the Financial Times, after a long market wait, the Fed finally released a discussion document on Jan. 20 as the basis for what is expected to be a “hot” discussion at the Fed in the coming months.
However, the Fed added that it is currently unclear how this discussion will play out.
“We look forward to hearing from the public and stakeholders as we learn about the pros and cons of a CBDC in the US,” Fed Chair Jerome Powell said in a statement.
In recent years, The US Federal Reserve has resisted the idea of a CBDC, stating that it will only issue digital currencies if the benefits outweigh the disadvantages. Meanwhile, the Central Bank of China (PBOC) has come a long way in testing the digital renminbi. The European Central Bank (ECB) is also making advances in this technology.
In the past, Mr. Powell has said that CBDCs “serve only as a complement, not a replacement, for cash and existing forms of digital currency.” US dollars one private sector, such as deposits in commercial banks”.
“The US Federal Reserve has finally launched an issue that central banks cannot avoid as they attempt to ensure monetary and political stability amid a host of new financial technology innovations, including the rapid shift to digital payments sweeping financial markets and Transforming financial institutions,” he told Professor Eswar Prasad of Cornell University.
The Fed’s public CBDC consultation process is expected to take 120 days. The Fed has yet to decide whether to issue a CBDC and if so, how the digital currency will be structured.
“A CBDC could provide households and businesses with a secure digital payment option as payment systems evolve, and could lead to faster payment options between banks.” Nation. However, such a digital currency still has its limitations,” the Fed said. “The problem involves how to ensure that a CBDC preserves monetary and financial stability and complements existing payment methods. Other important issues to consider are citizen safety and resistance to illegal financial activities.”
Goldman Sachs chief economist Jan Hatzius said it was unlikely would act quickly to issue a CBDC if that option were chosen. “The Fed will act cautiously. They will not rush to replace the system of financial intermediaries with banks in the center,” Hatzius said.
Aware of the risks of a CBDC and admits that such a digital currency could “fundamentally change the structure of the American financial system”. According to the Fed, the cost of capital for banks could rise if the amount of deposits held at the bank fell at one U.S. dollar Digital interest rates are commonly used. This will lead to an increase in borrowing rates for companies and households.
However, the Fed emphasized that this problem can be overcome by the CBDC’s design parameters, such as: B. Limiting the number of CBDCs an organization or individual can hold. The Fed also says the best way to meet America’s needs is for the private sector to provide digital wallets and accounts to make it easier to manage all related inventory and payments. Commercial banks and non-bank regulated financial services providers can fill this role.
“Individuals, businesses, and governments can use CBDCs to conduct basic transactions to purchase goods, services, or pay bills. Governments can also use CBDCs to collect taxes or pay benefits directly to citizens,” the Fed said.
Believes that inaction also leads to negative consequences. Without the development of a digital currency, the US could lose its status as a global superpower, the Fed document warns.
“It’s important to consider the implications of a future situation where many other countries and monetary unions may adopt their CBDCs,” the Fed said. “There has been some argument as to whether CBDCs are more attractive than existing forms of U.S. dollar, the role of the USD could diminish globally, and an American CBDC could help preserve the international role of the US dollar. U.S. dollar”.
Join CoinCu Telegram to keep track of news: https://t.me/coincunews
