Powell says digital dollar must ensure privacy, identification

Federal Reserve Chair Jerome Powell outlined four qualities a hypothetical digital currency in the US must have while adding that no final decision has been made on whether to proceed with creating one.

Powell said a central bank digital currency would need to ensure user privacy; it would need to be “identity verifiable,” similar to the way US bank accounts are identifiable to prevent money laundering; it would need to be “intermediated,” or widely embraced by the current banking system; and serve as a widely accepted means of payment.

Powell made the comments Wednesday during a virtual panel at the Bank for International Settlements Innovation Summit.

The Fed chair warned that crypto assets “have been used to facilitate illicit activity,” and this needs to be prevented. He said some also present financial stability concerns.

US central bankers are conducting research and experiments with digital currencies though Powell has stopped short of recommending a digital dollar, saying such a move would need more input from US lawmakers and stakeholders.

Fed officials are currently gathering feedback on a white paper on the topic they published in January, which discussed the risks and benefits of a central bank digital currency without endorsing one.

© 2022 Bloomberg

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