(Bloomberg) -- Federal Reserve Chair Jerome Powell joined international peers in saying the launch of a digital currency would be a momentous step for the financial system that needs careful preparation.
“We have an obligation to be on the cutting edge of understanding the technological challenges as well as potential the costs and benefits” of a digital dollar, Powell said at Bank for International Settlements event on Monday. “We don't need to rush this project.”
Although central banks may one day make their currencies directly available to the general public electronically, officials warn they need to address vital issues ranging from from privacy to financial stability.
Speaking at the BIS conference, Bundesbank President Jens Weidmann cautioned that a central bank digital currency could increase the risk of bank runs. Monetary authorities also shouldn't “crowd out” the private sector with their efforts, he said.
While the Fed and the European Central Bank are both looking into digital currencies, any potential introduction is probably still years away. A digital dollar would require consultation with lawmakers, and probably legislation.
“There is one particular issue: It cannot fail. It cannot fail at any particular point in time,” Agustin Carstens, general manager of the BIS, said. “To ensure that type of resilience, it takes a lot.”
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