This week, central bankers gathered at a round table hosted by the International Monetary Fund (IMF) to assess the merits and demerits of a possible central bank digital currency (CBDC), stressing that digital innovation has its advantages but political considerations carry significant weight.
An event to create a confrontation between central banks on the issue of CBDC
The panel, which hosted Federal Reserve Chairman Jerome Powell, Negara Malaysia Bank Governor Nor Shamsiah, Bank for International Settlements Director General Agustin Carstens and Saudi Arabian Monetary Authority Governor Ahmed Abdulkarim Alkholifey, appears to have concluded that although CBDCs may be useful for some countries, it is too early for them to be released.
Nothing particularly new was said during the one-hour segment where Powell reiterated that the US is considering implementing a digital dollar. "I actually think this is one of those issues where it is more important for the United States to tackle it well, rather than be the first," he said.
“Given the important role of the dollar globally, it is essential to stay on the frontier of research and policy development. The dollar is the main reserve currency in the world and there continues to be a large global demand for Federal Reserve notes ”.
The Federal Reserve Bank of Boston is partnering with MIT's Digital Currency Initiative on CBDC research, he noted. “These types of experiments improve our understanding of the risks and benefits of CBDCs by measuring trade-offs between different designs and system arrangements and assessing security risks from a policy perspective,” Powell said.
"We are also actively engaging with a wide variety of government, academia and private sector stakeholders to gather diverse perspectives and expertise on potential CBDC problems, the range of design options and other considerations."
Times are still unripe
Powell said much the same thing a year ago when he addressed US lawmakers saying that although central bank researchers were evaluating a potential digital dollar, it was unclear what specific benefits the US would enjoy.
Shamsiah said he believes the private sector "has an important role to play" in developing a CBDC, while Alkholifey argued that Saudi Arabia might consider a CBDC for its economic policy plans.
The IMF released a report on CBDCs and related policy considerations ahead of the event, according to which digital currencies that can also be traded on platforms such as Bitcoin Pro, they can be a useful tool for central banks, but the potential effects on their country's monetary policy objectives must first be investigated.
