Jerome Powell, the Federal Reserve Chairman has publicly admitted that he is unsure of the Fed issuing its own Central Bank Digital Currency (CBDC). However, he asked for approval from the US government, before the Federal Reserve takes any further actions towards the creation of CBDCs.
“I am legitimately undecided on whether the benefits outweigh the costs or vice versa,”, Powell said during a hearing before the Senate Banking Committee today. “we would want very broad support in society and Congress and ideally that would take the form of authorizing legislation as opposed to a very careful reading of ambiguous law,” he added.
CBDCs – just a government alternative?
Today’s statement by Powell about being uncertain of CBDC’s output was a follow-up to criticism he had received on his comments against cryptocurrencies. Powell had earlier commented against reaching a consensus on cryptocurrencies, stating that the decentralized system has “completely failed” to fit in the routine and get utilized as an everyday medium of financial transactions.
People had pointed out that the Federal Reserve is trying to advertise the CBDCs launched by them by digging flaws of the crypto market.
Fed’s arguments against crypto
Powell criticized crypto and promoted CBDCs on Wednesday at the House Financial Services Committee. He said that the only reason the Federal Reserve is launching the Central Bank Digital Currency (CBDC), is for the benefit of the traders.
It is being offered to the investors as a regulated and secure means of digital money, instead of the unregulated private alternatives, like cryptocurrencies and stablecoins. Furthermore, he elaborated on Thursday upon the failure of crypto to get unanimous approval by the public.
“With cryptocurrencies, it’s not that they didn’t aspire to be a payment mechanism, it’s that they have completely failed to become one except for people who desire anonymity, of course, for whatever reason,” he told Senator Cynthia Lummis of Wyoming.
Powell then countered the use of stablecoins as a comparatively better alternative than crypto. However, stablecoins still lack the regulatory aspect of the financial market.
“My point with stablecoins is they’re like money funds, they’re like bank deposits, and they’re growing incredibly fast but without appropriate regulation…And if we’re going to have something that looks just like a money-market fund or bank deposit … we really ought to have appropriate regulation and today we don’t.”, said Powell.