In a video posted Thursday, the Fed chair said the agency had been looking at all the changes happening with digital currencies.
“As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system,” Powell said. “In pursuit of these core functions we have been carefully monitoring and adapting to the technological innovations now transforming the world of payments, finance, and banking.”
Technological advancements around digital currencies have spurred great change in the way payments are done, the press release notes, and the Fed has been studying the way things have developed to see how the Fed itself can reposition to refine its role in the U.S.
Digital currencies have been known to offer new technologies for central banks. They can offer the possibility for the issuing of central bank digital currencies (CBDC), a popular topic worldwide as countries and banks explore how they can move forward. The press release notes that the Fed is looking at how a CBDC would work in the U.S., and how it could potentially improve on a system considered safe to possibly help more people or businesses.
Powell said it was “important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks.” He added that designing a CBDC would raise questions on monetary policy, financial stability, consumer protection, and legal considerations, all of which will likely need input from the public and elected officials.
As the Fed expedites its initiative for a digital currency, though, banks have been skeptical, fearing that this could cut in on their profits, disrupting the system of established institutions.