Fed re­searches 'hy­po­thet­i­cal' cen­tral bank dig­i­tal cur­rency

The Pak Banker - - FRONT PAGE - NEW YORK - AFP

The Fed­eral Re­serve Bank of Bos­ton is part­ner­ing with re­searchers at the Mas­sachusetts In­sti­tute of Tech­nol­ogy ( MIT) in an ef­fort to build and test a "hy­po­thet­i­cal" cen­tral bank dig­i­tal cur­rency ( CBDC), Fed Gov­er­nor Lael Brainard said in a speech Thurs­day at the Fed­eral Re­serve Bank of San Fran­cisco.

The cen­tral bank aims to gain a deeper un­der­stand­ing of the op­por­tu­ni­ties, chal­lenges and use cases of dig­i­tal cur­ren­cies as a com­ple­ment to cash and other pay­ments op­tions, Brainard said, adding that the find­ings from the study will be pub­lished, and any code­base that is de­vel­oped will be of­fered as open- source soft­ware for any­one to use for ex­per­i­men­ta­tion.

"There con­tin­ues to be strong de­mand for U. S. cur­rency, and we re­main com­mit­ted to en­sur­ing the public has ac­cess to a range of pay­ments op­tions," she said.

In her speech, the Fed gov­er­nor said the in­tro­duc­tion of bit­coin and other sta­ble­coins, such as Face­book's Li­bra, have raised fun­da­men­tal ques­tions about le­gal and reg­u­la­tory safe­guards and the role of cur­rency in so­ci­ety.

"Dig­i­tal cur­ren­cies, in­clud­ing cen­tral bank dig­i­tal cur­ren­cies, present op­por­tu­ni­ties but also risks as­so­ci­ated with pri­vacy, il­licit ac­tiv­ity, and fi­nan­cial sta­bil­ity," she said. "This prospect has in­ten­si­fied calls for CBDCs to main­tain the sov­er­eign cur­rency as the an­chor of the na­tion's pay­ment sys­tems."

Brainard also cited China's rapid ex­pan­sion of its own CBDC pi­lot pro­gram as mo­ti­va­tion for the Fed's re­search and ex­per­i­men­ta­tion.

China's Com­merce Min­istry an­nounced Fri­day that the coun­try has ex­panded its dig­i­tal cur­rency pi­lot pro­gram to a num­ber of large cities, ac­cord­ing to the The Wall Street Jour­nal.

The dis­cus­sion over es­tab­lish­ing a Fed- cre­ated dig­i­tal cur­rency has been on­go­ing. The lead­ers of the House Fi­nan­cial Ser­vices Com­mit­tee's Ar­ti­fi­cial In­tel­li­gence Task Force last fall urged Fed Chair­man Jerome Pow­ell in a let­ter to de­velop a U. S. dol­lar dig­i­tal cur­rency.

A sur­vey fo more than 13,000 peo­ple pub­lished in Fe­bru­ary on be­half of the Of­fi­cial Mon­e­tary and Fi­nan­cial In­sti­tu­tions Fo­rum ( OMFIF) found cen­tral banks to be the most trusted is­suers of dig­i­tal cur­rency. About 51% of re­spon­dents said they'd trust a dig­i­tal cur­rency is­sued by a cen­tral bank, com­pared with a 48% trust rat­ing for pay­ment ser­vice providers such as PayPal, 47% for com­mer­cial banks, 40% for credit card com­pa­nies and 37% for in­ter­net tech­nol­ogy com­pa­nies.

In ad­di­tion to the re­search, Brainard said Thurs­day, a "sig­nif­i­cant pol­icy process" would be re­quired for the cen­tral bank to con­sider the is­suance of a CBDC, "along with ex­ten­sive de­lib­er­a­tions and en­gage­ment with other parts of the fed­eral govern­ment and a broad set of other stake­hold­ers."

Brainard said there are also im­por­tant le­gal con­sid­er­a­tions.

"It is im­por­tant to un­der­stand how the ex­ist­ing pro­vi­sions of the Fed­eral Re­serve Act with re­gard to cur­rency is­suance ap­ply to a CBDC and whether a CBDC would have le­gal ten­der sta­tus, de­pend­ing on the de­sign," she added.

The Fed has not yet made a de­ci­sion whether to un­der­take a pol­icy process, Brainard said, adding the cen­tral bank is "tak­ing the time and ef­fort to un­der­stand the sig­nif­i­cant im­pli­ca­tions of dig­i­tal cur­ren­cies and CBDCs around the globe."

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.