Fed Chair Says Digital Dollar Will Complement Fiat Currency And Not Replace It

The chairman of the US Federal Reserve, Jerome Powell, noted that the US central bank digital currency (CBDC) would not replace fiat. Upon successfully developing the digital dollar, the chair said that the new digital currency would have to co-exist with physical cash.

According to Powell, introducing a CBDC only means that fiat currency is still needed. He said that the CBDC and digital dollar would serve their supposed purpose without disrupting the current payment system. Powell’s comment came months after the European Central Bank president, Christine Lagarde, said that the purpose of the digital euro is to compliment cash and not replace fiat currencies.

Speaking in a pre-recorded video featured in a payments conference held in Basel, the chairman said:

“Relevant to today’s topic, one of the three key principles highlighted in the report is that a CBDC needs to co-exist with cash and other types of money in a flexible and innovative payment system.”

Powell added that CBDCs would support central banks in delivering their duties. He explained:

“A recent report from the Bank for International Settlements and a group of seven central banks, which includes the Fed, assessed the feasibility of CBDCs in helping central banks deliver their public policy objectives.”

Over time, central banks worldwide have been working towards the creation of CBDCs. Lately, news has been on major developments on some digital currencies like the digital yuan. However, there has been no major development on the digital dollar.

Image Credits: Pixabay