The U.S. is looking to catch up to China as they finally look into developing a Central Bank Digital Currency. So far, China is in the far lead in blockchain technology.
s far as most of us know, China is taking a far lead in the embracing of blockchain and development of digital currencies. However, it finally appears that the United States might be finally taking notice and looking into a digital currency system of their own.
A tweet from Politico financial services reporter, Zachary Warmbrodt, revealed a letter in response to a letter from U.S. Members of Congress French Hill and Bill Foster on November 19.
The letter said that the US Federal Reserve is weighing the costs and benefits of a new central digital currency. Though at this time, they are not in development of one.
"While we are not currently developing a central bank digital currency, we have assessed and we continue to carefully analyze the costs and benefits of pursuing such an initiative in the U.S.," wrote Federal Reserve Chairman, Jerome Powell.
Powell discussed in the letter that the U.S. had a competitive payments market with fast and cheap services in comparison to other nations that were currently looking into a central bank digital currency (CBDC).
“To date, our observation is that many of the challenges [CBDCs] hope to address do not apply the US context including disuse of physical cash, narrow reaching or high concentrating banking, or, poorly developed payment infrastructure,” wrote Powell. – USE AS QUOTE
Also, In the letter, Powell confirmed that U.S. central bankers had explored and are continuing to explorethe possibility of developing a digital currency, but that there are currently many legal questions that have to be answered such as, the limits on supply of a CBDC, and if a CBDC would pay interest.
According to Powell, the agency is conducting its own small-scale, research-focused experiments to gain experience and better understand the opportunities and limitiations of CBDCs.
Similar to the People’s Bank of China (PBoC), the Powell had the same concerns about Libra on U.S. national currency, in their initial letter they said, "I think we agree that Libra raises a lot of serious concerns, and those would include around privacy, money laundering, consumer protection, financial stability.”
In response to Powell’s letter Hill said he was pleased the Fed is exploring the costs and benefits of a U.S. digital currency, stating, “this decision would have far-reaching implications on every aspect of American’s monetary policy and requires a deep level of analysis to ensure proper implementation.”
For Foster, the key concern was ensuring that the U.S. did not fall behind on the development of CBDCs and that the development could serve to protect the U.S. economy. He said of Powell’s letter, “my main concern is that we are not caught flat-footed by fast moving developments in other countries that may put our economy at a competitive disadvantage and threaten the primacy of the U.S. dollar.”
Despite the current development of CBDCs in many countries and China’s intentions to adapt and innovate, it doesn’t seem that the Federal Reserve has any intention of rushing towards development of their own CBDC. Today, the risks and unknowns that plague any potential CBDC for the U.S. make the positives unappealing.