Crypto enthusiasts expecting the Federal Reserve to issue its own token might have a wait ahead.
During a forum organized by the Swiss Institute of International Studies, Fed chief Jerome Powell said consumers were not “clamoring” for central bank-backed digital currencies (CBDC). “For us, (CBDC) raises substantial issues that we want to see resolved,” he said and pointed out a couple of problems with them.
CBDCs would need to be secure in cyberspace in order to prevent hackers from printing money at will he said. Another problem, according to Powell, was dismantling of a financial infrastructure with banks at the center, as intermediaries. “What will happen to intermediation?” he asked.
CBDCs hold the promise of connecting central banks directly to consumer accounts that hold tokens issued by them. The direct connection would take commercial banks out of the equation and may enable banks to monitor consumer spending and apply interest rates to the accounts.
But he held the door open for a Fed-issued token in the future. “I don’t want to sound like I am ruling it out,” he said.
Crypto Not a Good Idea: SNB Chief Jordan
Powell’s Swiss counterpart echoed similar thoughts about the introduction of CBDCs. “We do not believe it is a very good idea to have a central bank digital currency for the public at large exactly for the same reasons (as the Fed),” Swiss National Bank President Thomas Jordan said. He said Switzerland already had a very efficient payment infrastructure. In an earlier talk, he had said that CBDCs increased the possibility of a bank run.
Like Powell, he did not rule the introduction of CBDCs, however. It might occur if a new financial infrastructure is set up for digital assets, with banks trading the “new forms of securities” that require central bank “intervention”, he said. “It (issuance of CBDCs) is a very important very interesting question,” he said.
TSwitzerland is among the pioneers in crypto-related regulation. Several important cryptocurrencies have established headquarters in the country, including the Libra Association, Facebook’s cryptocurrency and blockchain venture.
Their comments come on the back of news that China’s Central Bank is readying to issue its own digital currency. The government of Marshall Islands, a tiny island in the Pacific Ocean, has also launched its own cryptocurrency.