{"id":155265,"date":"2021-01-15T14:14:03","date_gmt":"2021-01-15T11:14:03","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/us-fed-cbdc-a-very-high-priority-to-combat-bad-private-sector-money\/"},"modified":"2021-01-15T14:14:03","modified_gmt":"2021-01-15T11:14:03","slug":"us-fed-cbdc-a-very-high-priority-to-combat-bad-private-sector-money","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/us-fed-cbdc-a-very-high-priority-to-combat-bad-private-sector-money\/","title":{"rendered":"# US Fed: CBDC a \u2018very high priority\u2019 to combat bad private sector money"},"content":{"rendered":"

“# US Fed: CBDC a \u2018very high priority\u2019 to combat bad private sector money <\/strong>”
\n<\/p>\n

Cryptocurrency stablecoins could become systemically important overnight, says United States Federal Reserve Chairman Jerome Powell, and that\u2019s why the Fed is determined to get its own central bank digital currency right.<\/p>\n

CBDCs are the banking industry\u2019s answer to cryptocurrency stablecoins. While they are often hosted on the blockchain, they share little in the way of philosophical parity with their decentralized counterparts. CBDCs will be overseen by the banks that issue them and will be regulated under the laws of their respective jurisdictions.<\/p>\n

Speaking in an interview<\/a> with Yahoo Finance, Powell said advances in technology<\/a> had enabled private entities to create their own money \u2014 and that history had shown this was something to be avoided:<\/p>\n

\u201cTechnology has made this possible and effectively private sector actors can create the equivalent of digital money. We know in the past with private sector money, the public sometimes just thinks of it as money, and then at some point they find out it\u2019s not money. That\u2019s a very bad thing we need to avoid.\u201d<\/p><\/blockquote>\n

Powell can envision a scenario where stablecoins are suddenly relevant to a large enough number of people to become \u201csystemically important\u201d overnight. He said the Fed still doesn\u2019t know how it might respond to such an occurrence, and admitted that it isn\u2019t even close to understanding the risks:<\/p>\n

\u201c[Stablecoins] could become systemically important overnight and we don\u2019t begin to have our arms around the potential risks, how to manage those risks \u2014 and the public will expect that we do, and has every right to expect that [\u2026] It\u2019s a very high priority.\u201d<\/p><\/blockquote>\n

As high a priority as launching a CBDC may be, the Fed won\u2019t fall into the trap of trying to be the first. Russia, China, Sweden, Australia and the European central bank have all taken steps towards launching a CBDC (some are further along than others), but according to Powell, the U.S is always going to have first-mover advantage because of the dollar\u2019s status as the world\u2019s reserve currency:<\/p>\n

\u201cSince we are the world\u2019s reserve currency, we actually think we need to get this right and we don\u2019t feel an urge or a need to be first. Effectively it means we already have a first-mover advantage because we\u2019re the reserve currency.\u201d<\/p><\/blockquote>\n

Powell\u2019s laid back app<\/a>roach to the prospect of a \u201cCBDC gap\u201d emerging between world superpowers isn\u2019t shared by everyone. In October a senior Japanese finance minister warned that China\u2019s digital currency could eclipse the fiat monies of world nations if the digital yuan gets first-mover advantage. <\/p>\n

The president of the Chinese Finance Association dismissed this notion, adding that the digital yuan was not like Libra, and that it had no intention of replacing international currencies.<\/p>\n

Any prospective \u201cFedcoin<\/a>\u201d is still years away, according to Powell, who is determined to do it right, rather than fast \u2014 even if it means losing ground to private sector money in the meantime.<\/p>\n

\u201cWe\u2019re determined to do this right rather than quickly, and it\u2019ll take some time [\u2026] Measured in years rather than months.\u201d<\/p><\/blockquote>\n