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Fed, citing crypto risk, to open digital currency debate this summer

05/20/2021 | 02:00pm EDT

WASHINGTON, May 20 (Reuters) - Federal Reserve Chair Jerome Powell flagged the risks of cryptocurrencies in an unusual video message on Thursday that also laid out a clearer timetable for the Fed to consider adopting a digital currency of its own.

Highlighting the fast advances in financial technology and the potential benefits involved, Powell said that cryptocurrencies, stablecoins and other innovations "may also carry potential risks to those users and to the broader financial system."

As that technology advances, "so must our attention to the appropriate regulatory and oversight framework. This includes paying attention to private-sector payments innovators who are currently not within the traditional regulatory arrangements applied to banks, investment firms, and other financial intermediaries."

Powell said the Fed would release a discussion paper this summer "outlining our current thinking on digital payments, with a particular focus on the benefits and risks associated" with establishing a central bank digital currency. The Fed will ask for public comment as part of the process.

Powell said the Fed wanted to be sure any central bank digital currency provided benefits to consumers and businesses, and noted that "to date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value."

Powell's statement came just hours after the U.S. Treasury proposed new regulations on the use of bitcoin. Released through video on the Fed's website, it came amid a volatile week in which cryptocurrency values plunged, and the role of cryptocurrency in ransomware payments was highlighted in the shutdown of a major U.S. gas pipeline.

The Boston Fed is currently working with the Massachusetts Institute of Technology to research the technology that could be used for a central bank digital currency and will be releasing those findings in the third quarter. Powell and other Fed officials however have said they intend to move deliberately to ensure that the benefits outweigh any risks involved.

(Reporting by Howard Schneider; Editing by Andrea Ricci)

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.19% 0.7379 Delayed Quote.-4.07%
BITCOIN - EURO 11.42% 33286.25 Real-time Quote.26.53%
BITCOIN - UNITED STATES DOLLAR 11.54% 39311.18 Real-time Quote.21.95%
BRITISH POUND / US DOLLAR (GBP/USD) 0.48% 1.3823 Delayed Quote.0.53%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.18% 0.79682 Delayed Quote.1.36%
EURO / US DOLLAR (EUR/USD) 0.33% 1.18121 Delayed Quote.-3.65%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.10% 0.01345 Delayed Quote.-1.83%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.28% 0.69995 Delayed Quote.-2.91%
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