Federal Reserve Chair Jerome Powell confirms a potential “digital dollar” would not eliminate the need for cash in the United States
Federal Reserve Chair Jerome Powell stated yesterday that any new digital currency, if developed and implemented successfully, would need to coexist with physical cash. He emphasized that introducing a central bank digital currency (CBDC) would not mean the end of physical money, which will continue to be necessary.
“A recent report from the Bank for International Settlements and a group of seven central banks, including the Fed, assessed the feasibility of CBDCs in supporting central banks’ policy objectives,” Powell said in a pre-recorded video presented at a payments conference in Basel.
The potential “digital dollar” would be integrated alongside physical cash without disrupting the existing payments system.
“For today’s topic, one of the three core principles highlighted in the report is particularly relevant: a CBDC must coexist in a flexible and innovative payments environment alongside cash and other forms of money.”
Although the digital dollar has been mentioned in the media multiple times, no concrete plans or implementations have yet been announced.
Powell noted that the COVID-19 pandemic played a key role in accelerating government-led innovation around how financial transactions are processed and carried out. He offered a candid assessment of the Federal Reserve’s overall performance, saying the institution has made significant progress despite some setbacks.
“The COVID crisis has further underscored the need to address the limitations of our current arrangements for cross-border payments. And as this conference demonstrates despite the challenges of the past year, we have continued to make important progress.”
Powell’s remarks on a “digital dollar” echoed similar comments from European Central Bank President Christine Lagarde about a digital euro. Last year, Lagarde said the digital euro would serve as a complement to, not a replacement for, cash and suggested that a digital currency could help position public money at the center of payment systems across the region.
Other countries, including China and the United Kingdom, are reportedly developing their own digital currency prototypes, with China already moving forward with pilot programs for a digital currency.