At his Senate re-nomination hearing, U.S. Federal Reserve Chair Jerome Powell faced questions about a possible future digital dollar. In May 2021, the Fed Chair said a central bank digital currency (CBDC) paper would be published in the summer. He postponed the date to September in July, but it has not yet been released.
Senator Mike Crapo, the former Chair of the Senate Banking Committee, was concerned about the reasons behind the delay. “Are there problems with sharing this report with Congress and the public, and with what the Fed may be proposing with possibly centralizing a public digital currency?” Crapo asked.
Powell responded that the report should come out in the coming weeks. He said the reason for the delay was the Fed dealing with other issues in the Fall, such as monetary policy taking priority.
The Fed Chair also managed expectations about the content, saying that the report was more an exercise in seeking public input rather than stating positions, although it will take contain some decisions.
Meanwhile, Ranking Republican Member Senator Toomey is supportive of digital assets and stablecoins and expressed concerns over a CBDC overreach.
“Some have advocated that a central bank digital dollar be used in such a fashion that individual Americans have retail accounts with the Fed and the Fed becomes the retail banker for America,” stated Toomey. “It seems to me that there is absolutely nothing in the history, the experience, the expertise, the capabilities of the Fed that lend the Fed to be a retail bank. Is that a fair observation?”
Powell agreed. Toomey additionally asked whether a well-regulated private stablecoin could coexist with a CBDC, and Powell agreed it could.
Toomey previously wrote to Treasury Secretary Janet Yellen expressing concerns about potential overreach by applying existing laws to stablecoins. Subsequently, the President’s Working Group issued a report on stablecoins. In August last year, Toomey requested legislative proposals to support cryptocurrency innovation, blockchain and protect crypto investors.
Congress is divided on the need for a central bank digital dollar and there has been much debate on the topic.
In August 2021, two Federal Reserve Governors shared their positions on a CBDC. Lael Brainard sees a need for a digital dollar, but Christopher Waller does not.
A year earlier, it was revealed that the Boston Fed was working with the Massachusetts Institute of Technology (MIT) to develop a hypothetical CBDC. In a video, Neha Narula, who leads the MIT initiative, stated that ‘digital cash’ was a research topic.
