While Philadelphia Federal Reserve Bank President Patrick Harker believes it’s “inevitable” that central banks will eventually issue digital currencies, he warned that the United States shouldn’t be first in line.
Because of the dollar’s role as the world’s reserve currency, Harker said he doesn’t “think we should be the first mover as a nation to do this,” adding that “it is inevitable … I think it is better for us to start getting our hands around it,” according to Reuters.
Harker turned to the issue of digital currencies after fielding a question about the Federal Reserve’s launch of a real-time payments service, FedNow. He admitted that when it comes to the future of the Fed, digital currency will most likely play a part.
“I am looking at the next five years after that. What comes next? I do think it is something around digital currency,” he said.
But Harker said his opinion is currently “in the minority” at the Fed. Two years ago, Chairman Jerome Powell told conference attendees at Yale Law School that digital currencies issued by a central bank would become global targets for cyberattacks, cyber counterfeiting and cybertheft.
“Central banks could face difficult trade-offs between strengthening security and enabling illegal activity,” Powell said at the time. “Advanced cryptography could reduce vulnerability to cyberattacks, but make it easier to hide illegal activity. To the extent we relax strong cryptography to make it easier for authorities to monitor illegal activity, we could simultaneously weaken security.”
More recently, Powell expressed concerns over Facebook’s plan to launch its own cryptocurrency, Libra, saying it “raises serious concerns regarding privacy, money laundering, consumer protection, financial stability. These are concerns that should be thoroughly and publicly addressed.”
In the meantime, Harker’s staff is researching the issue, as well as planning a research conference for academics to be held next year.