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Fed’s Jerome Powell Says ‘Nowhere Near’ Moving Forward With CBDC

In testimony before Congress, Federal Reserve Chairman Jerome Powell said that the idea of the United States adopting a central bank digital currency (CBDC) is far from being realized. 

Speaking to the Senate Banking Committee Thursday (March 7), Powell said that the Federal Reserve is “nowhere near” moving forward with a CBDC, Reuters reported Thursday.

During his appearance on Capitol Hill, Powell addressed the speculative buzz surrounding the Fed’s involvement in digital currencies and the implications for the American banking system and consumer privacy, the report said. 

He said that the Federal Reserve has no plans to facilitate individual accounts that would directly compete with private banks nor intends to monitor personal financial transactions through such a framework, per the report. If it were to begin work on a CBDC, it would so through the banking system, Powell said.

On Feb. 26, five Senate Republicans introduced legislation that would block the Federal Reserve from issuing a CBDC, saying that such a move would require Congressional legislation. Sen. Ted Cruz has said in the past that a CBDC could be used by the federal government to track its citizens.

Beyond the topic of digital currencies, Powell also touched upon regulatory considerations, specifically the ongoing discussions about modifying the Basel III endgame proposals, according to the report. These adjustments aim to refine the way large banks assess risk and determine the necessary capital reserves to safeguard against potential losses.

The proposal has faced considerable pushback from the banking industry since its introduction in July, but Powell said that any changes would be deliberate and carefully considered throughout 2024 to strike the right balance, per the report.

The discussion also involved bipartisan expressions of concern from members of the Senate Banking Committee, the report said. They questioned the impact of the Basel III modifications on mortgage affordability and the risk of driving financial activities into less regulated sectors.

The hearing also saw Sen. Elizabeth Warren question Powell’s involvement in the Basel III process, suggesting that Vice Chair for Supervision Michael Barr should take the lead on these matters, per the report. However, Powell said that while Barr can make proposals, the decision-making process is a collective endeavor by the Fed’s board members.