Fed leader wants broad support – in public, Congress – before acting on CBDC

Before settling on issuing a “central bank digital currency” (CBDC), broad support among the public – and in Congress – is a must, the Federal Reserve Board chair told a Senate committee Thursday.

Testifying before the Senate Banking Committee (to deliver the semiannual Monetary Policy Report), Fed Board Chair Jerome H. (“Jay”) Powell said his agency would want “very broad support in society and in Congress” before moving forward with a CBDC.

“Ideally, that would take the form of authorizing legislation, as opposed to a very careful reading of ambiguous law to support this,” Powell said.

However, the Fed has not yet decided to take that action. For now, the agency is studying the issue and has resolved to issue a report later this summer. The prior day, before the House Financial Services Committee (testifying on monetary policy), Powell told the panel that the report would be issued “around early September,” and is expected to cover CBDCs and other digital payment technologies.

About his own views, Powell indicated to the Senate committee that he has not reached a conclusion about the central bank-issued digital currency. He said he is “legitimately undecided about whether the benefits outweigh the costs.”

Earlier this month, Fed Vice Chair for Supervision Randal Quarles, in a speech, expressed skepticism about the need for a CBDC, or the Fed’s role in adopting one.

In June, Powell issued a video message saying the Fed plans a close look at a U.S.-issued digital currency. He said the key focus for the agency is whether or how a CBDC could improve on what he called the existing “already safe, effective, dynamic, and efficient U.S. domestic payments system” in serving households and businesses.

However, on Thursday, Powell indicated that he hopes the Fed receives power to issue act on CBDCs. “It’s a very important initiative and I do think we should ideally get authorization,” he said.