U.S. digital currency considered as digital yuan threatens greenback

U.S. Federal Reserve Chairman Jerome Powell has confirmed Washington is closely evaluating the roll out of China’s new Central Bank-controlled digital currency.

In a 60 Minutes interview on Sunday, Powell said the Biden administration is also doing “quite a lot” of research into software development and design on what a U.S. digital currency would look like.

“Most major countries are now looking at the possibility of having digital currency. And really asking the question—in our very modern, advanced economy with a fast, efficient, full-blown payment system, would adding a digital currency, a form of digital currency, would it actually benefit the public that we serve?” said Powell.

“Technology has made this a possible thing. And so we feel it’s our obligation to understand it (digital currencies) . How would it work? What would the features of it be… We’re doing all that work.”

Greenback challenge

The digital Chinese yuan will have none of the anonymity afforded to users of Bitcoin and other cryptocurrencies, but it will be untethered to the global financial system.

This has many observers believing it could challenge the effectiveness of U.S. sanctions and even threatened the U.S. dollar’s reserve currency status – something already viewed by many as being challenged by the rise of Bitcoin.

But Powell insists he’s not concerned about the global status of the greenback.

“We are the world’s reserve currency. Meaning that people use dollars even if they have no connection to the United States. They use dollars to pay for things all over the world. So we’re in a great place with our currency. And as I mentioned, we have a highly evolved payment system.

“Really, the question is would adding a digital dollar, would it benefit our citizens and the people that we serve? And we don’t have an answer to that question yet.

“I think it’s possible is all I would say. I think it’s this very, very interesting, subtle, complex set of questions. You’ve seen many other countries like ours, well-off countries like ours, that are looking at it seriously. In some of those countries, the use of cash has declined precipitously.

“That is not the case here. Americans still like to use cash. So it’s something that’ll be decided based on the situation here in the United States.”