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Fed to release paper on central bank digital currency soon, Powell says By Reuters


© Reuters. FILE PHOTO: Federal Reserve chair Jerome Powell gives testimony during a U.S. House Oversight and Reform Select Subcommittee hearing about the coronavirus epidemic, which took place on Capitol Hill in Washington. June 22, 2021. Graeme Jennings/Pool via REUTERS/File Photo

By Jonnelle Marte

(Reuters) – The Federal Reserve will release research “soon” examining the costs and benefits of a central bank digital currency, or CBDC, Fed Chair Jerome Powell said on Wednesday.

In a press conference, Powell stated that the Fed is working “proactively” to determine whether to issue CBDCs and, if yes, how to do so. This was after the close of the U.S. central banks’ most recent two-day policy meeting.

According to Powell, the final test for CBDC evaluation is whether “clear, tangible, and unavoidable benefits outweigh all risks and costs.”

In a May announcement, Fed Chief John McClure said that the paper would address some of the issues in public policy that could be dealt with by CBDC.

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In addition to other research, the Fed has also begun other studies on the subject. This includes a multi-year collaboration between the Boston Fed with the Massachusetts Institute of Technology in order to study the possibility of a CBDC. Powell stated that the Fed would also welcome input from citizens and elected officials on the subject.

The central bank could issue digital currencies. This would differ from bitcoin and other cryptocurrencies that can vary in their value. The exact structure is still unknown, but a CBDC would give the business or person who has it direct claims on the central banks, just like physical cash.

Fed officials seem divided about the necessity of a CBDC. Fed Governor Lael brainard believes the United States should lead in this area, at a moment when large economies like China are taking a more active role. However, Randal Quarles, Fed Vice Chair of Supervision, and other Fed officials are less certain that the benefits outweigh any potential costs.

Powell stated that the bottom line was not yet decided.

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