FED and ECB: Digital currencies: Top central bankers see no need to rush
5:02 p.m., March 22, 2021
Top central bankers on both sides of the Atlantic do not currently consider rushing ahead with the introduction of digital versions of their currencies necessary. The US Federal Reserve is not even in a phase of “decision-making,” stressed Fed Chairman Jerome Powell on Monday at an online discussion group organized by the Bank for International Settlements (BIS).
There is “no rush” and the US does not have to go ahead. A prerequisite is also that Parliament give the green lightPowell said, “We would not move forward without the support of Congress.”
The US Federal Reserve will approach all steps carefully and with transparency. But it is already clear that the Fed does not want to compete with the banking industry when it comes to financing issues. The functioning financial system should not be destabilized. The Fed is currently exploring the limits and possibilities of digital currencies in cooperation with the Massachusetts Institute of Technology (MIT).
“There is no rush or urgency”
The discussion about the introduction of digital central bank money has recently picked up speed in the face of increasing digitalization in payment transactions. It is also about not losing touch with private sector advances such as Facebook’s planned cyber currency Diem. The Facebook project in particular had called governments, supervisors and central banks around the world.
The German Bundesbank boss Jens Weidmann said in the discussion that a time horizon of two to three years for the introduction of a digital euro was “certainly too short”. However, the use of cash is declining. It is therefore important to consider whether digital central bank money (CBDC) should step in. However, there are also other ways of meeting the needs of consumers and businesses than digital central bank money. “There is no rush or urgency for the introduction of CBDC,” said the Councilor of the European Central Bank (ECB).
China as a pioneer
On the whole, however, the ECB is already significantly further ahead than the US Federal Reserve on this issue. The euro watchdogs want to decide around the middle of this year whether a formal project should be started. If the green light is given, the future core properties of a digital euro would then first be determined in an investigation phase of around two years, as central bank director Fabio Panetta said last week. If it is then decided to move ahead, implementation will take another two to three years. Only at the end will the ECB be able to introduce a digital euro.
When it comes to digital currency, China is the pioneer among the major countries and currency regions. The People’s Republic has been working on a digital yuan for a long time and has already started large-scale test runs. Last year, the Bahamas became the first country in the world to introduce a digital version of its local currency, the “Sand Dollar”.