According to US Federal Reserve Chairman Jerome Powell, coins could become of systemic importance overnight, which is why the Fed intends to create the digital currency appropriate for the central bank.

CBDC is the banking industry’s answer to hoarding cryptocurrencies. Although they often host blockchain, they share little philosophical parity with their decentralized counterparts. Central bank digital currencies will be controlled by the issuing banks, and will be regulated according to the laws of their respective jurisdictions.

In a conversation with Yahoo Finance, Powell said that technological advances have made it possible for private enterprises to create their own money – and this history has shown that this should be avoided:

Technology has made this possible, and private actors can effectively create similar digital money. We know that in recent times, when we were dealing with money in the private sector, the public sometimes thought of it as just cash, and at some point they discovered that it was not money. This is a very bad thing that we should avoid. ”
Powell could envision a scenario in which stablecoins suddenly become relevant to enough people to become “systemically important” overnight. He said the Fed still did not know how to handle such an incident, and admitted that he did not understand the risks carefully:

“[Stablecoins] can become systematically important overnight, and we don’t start thinking about potential risks and how to deal with these risks – the public will expect us to do so, and everyone has the right to anticipate that […] This is a top priority.”
As high a priority as the CBDC launch, the Fed would not fall into the trap of trying to be the first. Russia, China, Sweden, Australia and the European Central Bank have taken steps to launch central bank digital currencies (some have gone further than others), but Powell said the US will always have a leading edge given the dollar’s position. As a reserve currency in the world:

“Since we are the world’s reserve currency, we really think we need to correct it, and we don’t feel the need to be first. This actually means that we already have the first mover advantage because we are the reserve currency.”
Not everyone shares Powell’s relaxed approach to the prospect of separating the CBD between the world’s great powers. In October, a high-ranking Japanese finance minister warned that the Chinese digital currency could cast a shadow over global paper money if the digital yuan gains an advantage for the first time.

The head of the China Finance Association rejected this view, adding that the digital yuan is not like a scale and does not intend to replace international currencies.

Powell says there are still a few years left for any promising Fedcoin, and he’s determined to do it right, not fast – even if it means losing ground for money in the private sector.

“We are determined to do it right, not quickly, and it will take some time […] measured in years, not months.”

Source: CoinTelegraph

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