Federal Reserve Chairman Jerome Powell has said his institution is looking into the possibility of developing a central bank digital currency (CBDC).

In a Nov. 19 letter responding to questions from lawmakers Rep. French Hill (R-Ark.) and Rep. Bill Foster (D-Ill.) in late September, Powell said the Fed has noted the efforts of other nations to explore a CBDC option, and that it continues to “carefully analyze the costs and benefits of pursuing such an initiative in the U.S.”

In their letter to Powell, Hill and Foster had expressed concerns over the potential risks to the dollar if another nation or private company creates a widely used cryptocurrency, and asked whether the central bank is look pursuing such an option.

While the U.S. central bank is looking at whether a fully digital dollar would offer benefits to the U.S., Powell said the Fed is not actively developing one. Further, a digital national currency may not offer advantages to the U.S. that it may do to other nations.

As an example, some countries have seen a “rapid migration by comsumers away from cash, while demand for cash in the U.S. remains robust,” Powell said. Similarly, payments systems in some jurisdictions may be slow and unreliable, and a digital fiat may offer an improvement for comsumers. On the other hand, payments in the U.S. are “innovative and competitive” and consumers have no shortage of options, according to Powell.

Introducing a digital dollar would also raise “important” questions regarding law, monetary policy, financial stability, regulation and operations, the Fed chief said. For example, would a “general purpose” CBDC be classed as legal tender and what are the “rights and obligations” of participants in such a system?

The digital dollar may also raise concerns about privacy and IT security if, unlike cash, all the Fed must maintain a record of all transactions made with the CBDC. Ushering in the new technology would also mean there would have to be decisions made over whether the digital currency would earn interest, and would its supply be capped.

Overall, Powell concluded that the Fed has “not identified potential material benefits of [a] general purpose CBDC to the implementation of monetary policy relative to our existing tools.”

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