Central bank digital currencies aka CBDCs have been taking the world by storm. Governments of several countries, despite despising cryptocurrencies, have been leaning towards developing their own. While this could be a great move towards digitalization, several believe that CBDCs had the ability to replace cash in the near future. However, Jerome Powell, the Federal Reserve Chairman of the United States of America suggested otherwise.
China has been undoubtedly spearheading the CBDC movement. The country has already made the digital yuan available to the public in several regions. While countries were trying to catch up to China, a few others were still examining the prospects of this.
CBDC Replacing The Dollar Highly Unlikely
In a recent event held in Switzerland, the Fed Chairman addressed the potential rise of CBDCs. The event preceded by the Committee on Payments and Market Infrastructures, had over seven central banks including the US’s reportedly looked into the prospects of the CBDC. Powell stated,
“A recent report from the Bank for International Settlements and a group of seven central banks, which includes the Fed, assessed the feasibility of CBDCs in helping central banks deliver their public policy objectives,”
While several across the globe have been speculating that central banks currencies could possibly take over cash, Powell suggested that every CBDC should “coexist” with cash as well as other forms of money. He pointed out flexibility and an “innovative payment system” as major criteria for the same.
Its no doubt that the COVID-19 pandemic accelerated the leap towards digitalization. The lack of human touch made the globe realize the importance of going digital. This further gave rise to an array of innovations in the same field.
He added,
“The Covid crisis has brought into even sharper focus the need to address the limitations of our current arrangements for cross-border payments. […] And as this conference amply demonstrates, despite the challenges of this last year, we still have been able to make important progress.”