Fed Chair Assuages Digital Dollar Anxiety Amid Rising CBDC Efforts

Federal Reserve chair Jerome Powell has stated that the United States is not considering a central bank digital currency (CBDC) and has no interest in one that surveils users. He made these remarks during a hearing before the Senate Committee on Banking, Housing, and Urban Affairs on March 7. Powell emphasized that the Fed is far from recommending or adopting a CBDC in any form. This statement coincided with Hong Kong’s central bank’s new push for a wholesale CBDC and reports of BRICS working on a blockchain-based payments system. Powell also highlighted concerns about a retail-focused CBDC enabling surveillance, citing China’s digital yuan as an example. He assured that the US government would not propose or allow such surveillance.

Powell explained that if the Fed were to consider launching a CBDC, it would be done through the existing banking system. He reassured that individual accounts for all Americans would not be implemented since only banks have accounts at the Fed. Powell stressed that a central bank digital currency is not a near-future possibility and urged people not to worry about it. He reiterated his stance that Congress must authorize the Fed to introduce a retail CBDC. Senator Cynthia Lummis raised concerns about the Fed creating a CBDC without legislative authorization, to which Powell agreed.

According to data from the Atlantic Council, as of December 2023, 11 countries, primarily in the Caribbean, have launched a CBDC. Pilot CBDC trials are underway in 21 countries, including China’s e-yuan, while 33 countries are still in the process of developing their CBDC implementations. In March 2022, President Joe Biden signed an executive order urging the Fed to explore the possibility of a CBDC.