Fed to Release Paper on Central Bank Digital Currency: Powell

The Federal Reserve will release research “soon” examining the costs and benefits of a central bank digital currency, or CBDC, Fed Chair Jerome Powell said on Wednesday.

“We’re working proactively to evaluate whether to issue a CBDC and, if so, in what form,” Powell said in a news conference following the conclusion of the U.S. central bank’s latest two-day policy meeting.

The ultimate test that will apply when assessing a CBDC, he told reporters, is if there are “clear and tangible benefits that outweigh any costs and risks.”

The Fed chief said the discussion paper, announced in May, will tackle some of the public policy issues that could be addressed with a CBDC.

The central bank is also doing other research on the topic, including a multi-year research project the Boston Fed is undertaking with the Massachusetts Institute of Technology to explore the technology that could be used for a CBDC. The Fed will also seek input on the issue from the public and from elected officials, Powell said.

A digital currency issued by the central bank would be different from cryptocurrencies such as bitcoin, which are decentralized and can fluctuate wildly in value. While the exact structure hasn’t been decided, a CBDC could give the person or business who holds it a direct claim on the central bank, the same as with physical cash.

Fed officials appear divided on the need for a CBDC. While some, including Fed Governor Lael Brainard, say the United States should be a leader in the area at a time when other large economies such as China are moving more aggressively, Fed Vice Chair for Supervision Randal Quarles and others are more skeptical that the benefits will outweigh the costs.

“So bottom line, we haven’t made a decision,” Powell said.

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