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Crypto Reporter
Shalini Nagarajan
Crypto Reporter
Shalini Nagarajan
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Fed Chair Jerome Powell said Tuesday that the US central bank will not develop a central bank digital currency (CBDC) during his tenure.
His announcement ended years of speculation that the Fed might follow China’s lead by launching an official digital currency.
During the Fed’s seminannual testimony, Powell addressed Sen. Bernie Moreno’s (R-Ohio) query to assure that the US would refrain from introducing a CBDC as long as he remains chairman. Powell replied positively.
CBDC Research Fails to Identify a Definite Requirement
For at least four years, the Fed actively explored the concept of a CBDC, culminating in a detailed 2022 study that weighed both its potential benefits and drawbacks without drawing a firm conclusion. During this period, many officials expressed concerns, generally agreeing that a CBDC is unnecessary while highlighting privacy issues among other matters.
Moreover, the complexity of implementing such a system, ongoing policy debates around privacy versus surveillance, the efficiency of the current US payment infrastructure and legal challenges over the Fed’s authority to create a CBDC without Congressional approval all argue against its introduction.
In the meantime, the Fed has rolled out the FedNow payments system, which addresses many of the same challenges a CBDC would tackle. Additionally, during his testimony, Sen. Bernie Moreno urged Powell to expand the availability of 24-hour money transfers through FedNow.
Powell to Serve Through 2026, Defying Calls for an Early Departure
As debates over US monetary policy intensify, it’s important to note that Powell continues to lead the Fed. President Donald Trump originally appointed him in 2017, and he now serves a term through May 2026.
Despite their public disagreements—particularly over interest rate decisions—President Joe Biden reappointed Powell for a second term in 2021.
And although Trump has shown frustration with Powell’s policies in the past, he recently confirmed he wouldn’t try to replace him, remarking that Powell wouldn’t step down quietly.
In November, Powell declared that he would not leave office early if Trump attempted to remove him, saying that the law forbids early dismissal of any Fed governor before their term ends.
Powell and Trump United in Rejecting CBDCs
However, Powell and Trump agree on rejecting a CBDC. Recently, Trump signed an executive order banning its creation.
The order states: “Except to the extent required by law, any ongoing plans or initiatives at any agency related to the creation of a CBDC within the jurisdiction of the United States shall be immediately terminated, and no further actions may be taken to develop or implement such plans or initiatives.”
Trump has consistently criticized CBDCs, arguing that they would give the government absolute control over personal finances.
