Chairman Powell "Fed to Lead Establishment of International Standards for Digital Currency"
Fed Plans to Release First Digital Currency Report This Summer
Concerns Over China's Issuance Speed... Competition for Leadership Expected to Intensify
[Asia Economy Reporter Park Byung-hee] "We want the Federal Reserve (Fed) to play a leading role in establishing international standards regarding digital currency."
Jerome Powell, Chair of the Fed, made this statement on the 20th (local time) while announcing plans to release the Fed's first report on digital currency (CBDC) this summer. This reveals an intention to maintain financial hegemony, currently held through the dollar as the global reserve currency, in the future digital currency market as well.
The Fed has so far shown a stance of not rushing the issuance of a digital dollar. However, with the cryptocurrency market, including Bitcoin, gaining significant attention recently and central banks around the world accelerating digital currency issuance, the Fed appears to be growing increasingly concerned.
Derek Tang, Economist at LH Mayer/Monetary Policy Analytics, pointed out, "There has been complacency within the Fed with the mindset of 'We are the reserve currency country,'" and explained that the announcement of the digital currency report shows that the Fed is changing.
With the Fed revealing plans to soon present its views on digital currency, the competition for leadership in the digital currency market is expected to intensify further.
China, ahead of the US in the digital currency race, has already conducted real-life experiments using the digital yuan with over 500,000 citizens in major cities such as Beijing, Shenzhen, and Suzhou. Christine Lagarde, President of the European Central Bank (ECB), expressed a desire to issue a digital euro within four years. The Swedish central bank also released its first digital currency report earlier last month, announcing plans to issue a digital currency within five years.
Consulting firm PricewaterhouseCoopers (PwC) released a report last month stating that over 60 countries are considering digital currencies, ranking China third among countries leading the digital currency market competition. The first and second places were the Bahamas and Cambodia, respectively. The Bahamas has already issued a digital currency.
Given this situation, the Fed can no longer afford to be complacent. It is known that the Fed has been conducting technical projects on the digital dollar at the Boston Fed.
The British economic weekly The Economist recently analyzed that the reason central banks worldwide are interested in digital currencies is due to a "fear of losing control." As the influence of privately created currencies like Bitcoin grows, central banks fear losing their influence. The Economist analyzed that by issuing digital currencies in response, central banks aim to re-concentrate authority back to themselves.
According to The Economist, digital currency fundamentally takes the form of deposits held directly at the central bank rather than traditional banks. Deposits are guaranteed by the state, not by banks that can go bankrupt. Also, because it can be used cheaply, it can reduce operating costs in the financial industry. It can also cover areas that the private sector cannot handle, providing financial services to 1.7 billion people who previously could not access banking services.
However, The Economist also pointed out the risk that central bank digital currencies, based on strong influence, could become a "Big Brother" or panopticon that controls citizens.
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