According to the Federal Reserve (Fed) chairman Jerome Powell, the report on the feasibility of the central bank digital currency (CBDC) will “soon” be released and will include cost analysis and a list of benefits of transitioning to a monetary system powered by a blockchain-enabled currency.
Key takeaways:
- As reported by Reuters, the upcoming paper is highly anticipated as it is set to reveal the US leading financial authority’s stance towards CBDCs and possibly give some clues about Fed’s position towards the cryptocurrency sector in general.
- Massachusetts Institute of Technology (MIT) is working on the separate CBCD report, which is to be released sometime in the coming weeks, as a part of its multi-year research collaboration with the Boston Fed.
- Powell said that given the US Dollar position as a world reserve currency, it is of the utmost importance “to do this right than to do it fast.” He added that CBCDs must present “clear and tangible benefits that outweigh any costs and risks,” if they were to be accepted as a viable monetary instrument going forward.
- CBDC is a virtual form of fiat currency, a digital representation of a particular nation’s legal tender, which uses blockchain technology in order to facilitate money transactions.
- Central bank digital currencies differ from traditional cryptocurrencies, such as Bitcoin and Ethereum, in that the person holding them holds a direct claim on the central bank.
- Major countries and regions around the world are working on their own version of CBDC, with China committing to digital Yuan, and the European Central Bank working on the digital version of Euro.
- Congressman from Virginia, Don Beyer recently proposed a “Digital Assets Bill” that would, among other provisions and rule changes, grant the necessary legal powers to the Fed to issue digital banknotes. To read more about the highly controversial crypto legislation that is awaiting a vote in the US House of Representatives, click here.
