Federal Reserve Chair Jerome Powell said Thursday central bank digital currencies (CBDCs) will need to coexist with cash.
Speaking at a virtual payments conference hosted by the Basel Committee on Banking Supervision, Powell cited a report on CBDCs from the Bank for International Settlements and a group of seven central banks, including the Fed.
“One of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system,” Powell said. “Improvements in the global payments system will come not just from the public sector but from the private sector as well.”
Powell added the Fed Board of Governors is conducting experiments on CBDCs along with the Federal Reserve Bank of Boston, which is working researchers at the prestigious Massachusetts Institute of Technology (MIT).
In recent months, Powell has emphasized several times that the U.S. would not act fast on issuing a digital dollar because of the physical dollar’s status as the global reserve currency.
The latest comment, though, is in line with Powell’s previous remarks about the Fed taking the prospects for a digital dollar seriously. Powell has said the Fed will engage with the public on the topic in 2021 and will seek congressional approval before issuing one.
CBDCs are an early-stage payments innovation that governments hope can increase payments efficiency and lower costs by running them on blockchains. The details on CBDCs are still murky, and detractors argue most transactions today involve money that’s already digital.
There’s a fear some governments may use CBDCs for increased financial surveillance. At the moment, it looks like the U.S. could favor privacy in its CBDC development.