Fed: Cryptocurrencies could pose potential risks, will release discussion paper on issuing CBDCs this summer

Federal Reserve Chairman Jerome Powell (Jerome Powell) said in a speech Thursday that cryptocurrencies, stablecoins and other innovations could pose potential risks to users and the financial system as a whole.

Fed: Cryptocurrencies could pose potential risks, will release discussion paper on issuing CBDCs this summer

Federal Reserve Chairman Jerome Powell (Jerome Powell) spoke on Thursday, saying cryptocurrencies, stablecoins and other innovations could pose potential risks to users and the financial system as a whole, according to Reuters.

We must also pay attention to the appropriate regulatory and supervisory framework,” he said. This includes a focus on private-sector payments innovators that are currently outside the traditional regulation that applies to banks, investment firms and other financial intermediaries.”

Powell said the Fed wants to ensure that any centrally banked digital currency delivers benefits to consumers and businesses, noting, “To date, the fluctuating value of cryptocurrencies has not made them a convenient payment method, given other factors. “

Powell said the Fed will release a discussion paper on issuing CBDCs this summer that will explore the impact of rapidly evolving technology on digital payments, with a particular focus on the possibility of issuing a U.S. central bank digital currency, and that the paper will complement the Federal Reserve System study already underway.

As the central bank of the United States, the Federal Reserve is responsible for promoting monetary and financial stability and the security and efficiency of the payments system,” he said. In pursuing these core functions, we have been carefully monitoring and adapting to the technological innovations that are transforming the world of payments, finance and banking today.”

The technology also opens up new possibilities for central banks, including the Federal Reserve. In particular, it makes possible the development and issuance of central bank digital currencies or CBDCs.

Powell added: “We believe it is important that any potential CBDC can serve as a complement to, rather than a substitute for, cash and current private sector digital dollars, such as deposits in commercial banks. the design of a CBDC will raise considerations of monetary policy, financial stability, consumer protection, law and privacy, and will require careful thought and analysis including input from the public and elected officials.”

The Boston Fed is currently working with the Massachusetts Institute of Technology on technology that could be used for a central bank digital currency, and will announce those results in the third quarter. Powell and other Fed officials have said they intend to act to ensure that the benefits outweigh any risks involved.

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