Federal Reserve Chairman Grilled Over Cryptocurrency Plans

Federal Reserve Chairman Jerome Powell yesterday presented his monetary policy report before the U.S. House Financial Services Committee. His presentation brought about a deluge of questions from members of Congress; it lasted for about an hour.

Representative Bill Foster, a Democrat from Illinois, fired questions at Powell for a good five minutes; most of the questions were about cryptocurrency.

Federal Reserve Governor Lael Brainard earlier this month revealed that the Federal Reserve was considering the possibility of developing and issuing a government-backed virtual currency. She mentioned that the Fed was also looking into the “risks” involved in doing so. Brainard spoke about “the potential for a CBDC” or central bank digital currency.

Foster cited Brainard’s remarks and asked for Powell’s point of view. Powell cleared that he feels that the U.S. Dollar is performing absolutely fine and that the system of “single government currency at the heart of the financial system” was working well for the country. He said that any attempt to modify this system will have a consequence that is what should be understood. Powell said that,

Preserving the centrality of a central, widely accepted currency that is accepted and trusted is an enormously important thing.

Powell chose his words very carefully. He acknowledged the fact that central banks around the world are considering to launch their crypto coins as the U.S. is looking into the option of having central bank crypto.

The next question posed by Foster was regarding China’s plans to launch their state-backed cryptocurrency and what us the take of U.S. Powell replied that the model followed by China will not be workable in the United States; he explained with an example,

The idea of having a ledger where you know everybody’s payments, that’s not something that would be particularly attractive in the United States context. It’s not a problem in China.

According to Powell, the digital coins by PBOC (People’s Bank of China) would be centralized and completely under the control of the Chinese government, when the entire intention of cryptocurrency is that it is decentralized. Consumers in the U.S. are accustomed to freedom and privacy; a financial ledger that is accessible by the government, wherein all their data can be viewed by the competent authority, will receive flak in general.

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