Fed Chairman “Digital Dollar, High Priority”
Federal Reserve Chair Jerome Powell said digital dollar issuance is a high priority for the Fed’s work.
On February 23, 2021 (hereafter local time), according to foreign media such as Forbes, Chairman Powell said at the Senate Banking Committee’s hearing that “digital dollar issuance is being carefully considered. It is one of the high-priority projects.”
The digital dollar issuance, he explained, is subject to a number of technical and policy issues, and requires considerable time and effort for the entire Fed.
“The Fed is committed to solving technology problems and is discussing matters widely with the public and transparently with stakeholders,” said Chairman Powell.
“The dollar is the reserve currency of the world. It is more important to do it properly than to issue digital currency first.”
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The Fed’s Issuance Plan From’No’ to’Theory’
The Fed was negative about the digital dollar issuance. Powell said on November 21, 2019, “We are aware of the digital currency work of other countries and private companies, but the need for digital currency is not as great as the US has an innovative and competitive payment system.” Some have suggested that the US will not need to issue digital dollars within the next five years.
The Fed has begun expanding research and experimentation to better understand the opportunities and risks of digital currency issuance in 2020. Facebook’s stablecoin Libra, the demand for improved currency access due to the spread of Corona 19, and the movement of the digital renminbi in China highlighted the need for digital currency research.
In February 2020, Fed Chairman Jerome Powell said, “Libra has ignited the bank’s CBDC work,” and “recognizing the influence of digital currency and doing its best in related work.” In August, the Fed also revealed the fact of research cooperation with Massachusetts Institute of Technology (MIT), saying, “The United States should be at the forefront of digital currency-related research and policy development.”
Currently, the Fed is taking the position that “it’s more important to do it right than to do it first” when it comes to digital dollar issuance. “We have moved away from the cautious approach of the past and have started a full-fledged study. 80% of the regional Feds are doing the research,” said Powell.
Maintaining quantitative easing in the US… The future of digital dollar and bitcoin is mixed
Chairman Powell also said at the hearing that he would maintain the existing quantitative easing policy for the time being. The U.S. is releasing money into the market by lowering interest rates to zero and buying 120 billion dollars a month in bonds to support the market hit by the spread of Corona 19.
“The economic recovery is still incomplete,” said Chairman Powell. “Until the 2% target for full employment and inflation is reached, we will maintain the zero interest rate policy and continue to purchase large-scale assets.” He added, “We have hopes of returning to a more normal situation later this year due to the reduction in the number of corona patients and vaccinations.”
It is noteworthy how the Fed’s continued quantitative easing policy will affect the cryptocurrency market. Bitcoin has emerged as a means of hedging inflation in the context of the Fed’s quantitative easing policy. Bitcoin rose to $58,000 on February 22, exceeding the market cap of $1 trillion, but it also showed extreme volatility, plunging by 16% due to rising U.S. Treasury yields and negative comments from U.S. Treasury Secretary Janet Yellen.
Finance Minister Janet Yellen warned that “Bitcoin is a very speculative asset,” while “digital currency will be able to implement fast and efficient payment services.”
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