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Pedestrians pass a digital sign advertising the latest rates for currency in Istanbul. Photographer: Kostas Tsironis/Bloomberg
Kostas Tsironis/Bloomberg News
The Federal Reserve on Thursday announced it is building and testing a hypothetical digital currency, equivalent of cash.
The goal of the program is to enhance the Fed’s understanding of digital currencies, said Fed Governor Lael Brainard, in a speech to a conference on innovation sponsored by the Fed’s San Francisco regional bank.
Brainard went to great pains to stress that the central bank is not poised to issue digital dollars.
A “separate policy process” involving thorny legal questions would be needed if the Fed ever wanted to use a digital currency. The central bank has not made a decision to even start such a process, Brainard said.
“We are taking the time and effort to understand the significant implications of digital currencies and central-bank-digital-currencies around the globe,” Brainard said.
“Given the dollar’s important role” as a global reserve currency, it is essential the Fed remain on the frontier of research and policy development of digital currencies, Brainard said.
“There continues to be strong demand for U.S. currency and we remain committed to ensuring the public has access to a range of payment options,” Brainard said.
Researchers at the Brookings Institution, in a paper last month, said that a central bank digital currency “has progressed in the past few years from a bold speculative concept to a seeming inevitability.”
In the wake of the coronavirus pandemic, prominent economists have noted that a digital currency would have made it easier for the government to send stimulus checks to workers.
Brainard noted that China has moved ahead rapidly on its version of a central-bank-digital currency.
