CBDC (Central Bank Digital Currency) is gaining traction among global nations. Various nations, including Iran, Jamaica, Mexico, Europe, Australia, and the US, are silently planning the possibility of launching a CBDC. Now, it is getting attention from the US Fed.
The Reserve Bank of Australia released a CBDC pilot project whitepaper yesterday. Iran’s central bank also announced plans to deploy a pilot project for its CBDC. The Federal Reserve expressed in an announcement earlier this year that they are exploring CBDCs. The Fed is looking into its possible risks and potential benefits of it.
The vision was to utilize central bank digital currencies to create an efficient domestic payment system in the US. The Fed chair, Jerome Powell, speaks about CBDC in a panel discussion on digital finance by Banque de France.
Powell wants CBDCs to have 4 characteristics
Powell stated in the panel discussion that if they were to pursue a CBDC, it should have four characteristics. The first one that Powell stated is that it should be “intermediated.” Secondly, it should be “privacy protected.” Thirdly, Powell addressed that it should be “identity verified.” This means that the US central bank digital currency would not be an anonymous instrument. The details of the holder and to whom and where it is transferred will be public.
The fourth characteristic stated by Powell is “interoperability.” He stated that they are trying to balance privacy protection with identity verification.
Powell says that in order for the Fed to proceed with a CBDC, approval from both Congress and the executive branch is necessary. Additionally, he anticipates that this procedure will take a few years to complete because they are using accurate analysis to establish conclusions.
“So, we see this as a process of at least a couple of years, where we’re doing work and building public confidence in our analysis and in our ultimate conclusions, which as I say, we certainly haven’t reached yet.”