Chairman Jay Powell is crediting Facebook’s proposed currency Libra for prompting the Federal Reserve to take a closer look at digital assets.
Speaking before the U.S. House Financial Services Committee, Powell confirms that central banks around the world are exploring the possibility of creating digital versions of fiat currencies.
“Every major central bank is currently taking a deep look at that. We feel that’s our obligation, technology has now made that possible…
Having a single government currency at the heart of the financial system is something that has served us well. It’s a very, very basic thing. It really hasn’t been in question, and I think before we move away from that, we should really understand what we’re doing.”
Libra and Facebook came under fire from Powell and other policymakers last year, when they expressed concerned about the tech giant’s track record on data privacy and the financial impact of a stablecoin that has the power to reach a built-in user base of billions.
“Frankly, Libra really lit a fire and was a bit of a wake-up call that this is coming fast and could come in a way that is quite widespread and systematically important – fairly quickly, if you use one of these big tech networks like Libra did.”
Powell reiterates that the organization is merely examining the possibility of creating a digital asset and nothing is set in stone.
“We fully appreciate the importance of making quick progress – we have not decided to do this, though. There are many questions that need to be answered around digital currency for the United States, including cyber issues, privacy issues. Many operational alternatives present themselves, so we’re going to be working through all of that.”
As for Bitcoin and the crypto markets, Powell says he believes the US should continue to develop a robust regulatory system for the emerging assets.