The development of an official digital version of the dollar could help safeguard its global dominance as other countries issue their own currencies, Federal Reserve (Fed) Chairman Jerome Powell said.
“A US CBDC (central bank digital currency) could potentially help maintain the international standing of the dollar”, he said in introductory remarks to a conference organized by the central bank on the international role of the dollar.
The Fed has just finished a four-month public comment period soliciting opinions on the idea of a digital dollar. The entity’s vice president, Lael Brainard, has become a key supporter, while Governor Chris Waller has been against it.
“When considering feedback we will be thinking not only about the current state of the world, but also about how the global financial system could evolve in the next five to ten years.Powell added.
Ten nations have already launched central bank digital currencies and another 105 countries are exploring the option, according to the Atlantic Council, raising fears the dollar could lose some of its dominance to China.
The greenback remains underpinned by key fundamentals, including a commitment to transparency, the rule of law and full independence from the Fed, Powell noted.
In addition, the Fed’s commitment to its price stability mandate contributes to widespread confidence in the dollar as a store of value, he added.
“To that end, my colleagues and I are very focused on bringing inflation back to our 2% target.”, he commented.
Earlier this week, the Fed decided on its biggest interest rate hike in more than a quarter-century in a bid to curb a spike in inflation.