On Tuesday, Fed Chair Jerome Powell stated that the US central bank will not create a central bank digital currency (CBDC) while he is in office.
After years of conjecture, his declaration put an end to the possibility that the Federal Reserve may introduce an official digital currency, following in China’s footsteps.
Powell responded to Senator Bernie Moreno’s (R-Ohio) inquiry at the Federal Reserve’s semi-annual testimony, assuring him that the United States will not create a CBDC as long as he continues to serve as chairman of the Federal Reserve.
CBDC Research Fails to Identify a Definite Requirement
At the very least, the Federal Reserve actively investigated the idea of a CBDC for a period of four years, culminating in a comprehensive study in 2022 that examined the potential advantages and disadvantages of the CBDC without arriving at a definitive judgment.
During this time period, a great number of officials voiced their concerns, expressing their general agreement that a CBDC is not required and bringing attention to privacy concerns, among other issues.
Furthermore, arguments against its implementation include the complexity of creating such a system, ongoing policy disputes regarding privacy versus surveillance, the effectiveness of the current payment infrastructure in the United States, and legal concerns regarding the Federal Reserve’s jurisdiction to form a CBDC without the consent of Congress.
During this interim period, the Federal Reserve has implemented the FedNow payments system, which addresses a significant number of the same concerns that a CBDC would address.
Furthermore, during his hearing, Senator Bernie Moreno encouraged Powell to broaden the availability of money transfers through FedNow that are available around the clock.
It is essential to keep in mind that Powell is still in charge of the Federal Reserve, notwithstanding the intensifying disagreements regarding the monetary policy of the United States. It was in 2017 when President Donald Trump made the initial appointment, and he is currently serving a term that will last until May 2026.
In 2021, President Joe Biden reappointed Powell for a second term, despite the fact that they had public differences, particularly on choices regarding interest rates.
In addition, despite the fact that Trump has previously expressed his dissatisfaction with Powell’s policies, he recently confirmed that he would not attempt to replace him, stating that Powell would not easily step down from his position.
Powell stated in November that he would not resign from his position in the Federal Reserve if President Trump made an attempt to remove him from office. He stated that the law prohibits the early dismissal of any Fed governor before the conclusion of their term.
Powell and Trump United in Rejecting CBDCs
Powell and Trump, on the other hand, concur that we should reject a CBDC. Shortly ago, President Trump signed an executive order that prohibits the construction of it.
The order says that any ongoing plans or initiatives at any agency in the United States that have to do with making a CBDC must end right away, unless required by law. Nothing else can be done to develop or carry out these plans or initiatives.
The process of developing or implementing such plans or initiatives cannot proceed further. CBDCs have been the subject of Trump’s continuous criticism, with the argument being that they would grant the government complete authority over individual financial matters.
