Powel stated that an early analysis would determine whether CBDCs are the best solution for the United States. Defenders of CBDCs say that they allow manipulating interest rates directly in user accounts.
The US Federal Reserve (Fed) plans to investigate the risks and benefits of implementing a central bank digital currency in the territory. The reason for that is the current global trend that led Hong Kong to publish the first white papers to create its CBDC.
Although a study on implementing a CBDC has begun, maybe no one will see the final decision anytime soon. Contrary to decentralized cryptocurrencies like Bitcoin and Ether, the central bank of the country supports CBDCs.
The implementation of a digital dollar would be a faster and cheaper solution for making electronic payments. People who do not have a bank account or cannot receive money in the traditional way can get financial aid from the government.
Jerome Powell, the Fed chair, said they are not seeking to be one of the world’s top issuers but to create a secure and stable solution. Experts believe that the fundamental role of the US dollar as a world currency is the most worrying problem.
Powel and other Fed officials said that early analysis would determine whether CBDCs are the best solution. The research aims to analyze the problem and determine whether its benefits are clear and tangible. Likewise, it takes into account the risks and costs related to the development of that digital currency.
The study of the proposal includes the publication of a technical analysis on the subject and the public request of different opinions.
Some Countries of the World Want to Adopt CBDCs
Honduras and Guatemala will be the other Central American countries that will follow the idea of El Salvador, which adopted Bitcoin as its legal tender. However, they want to issue their CBDCs rather than adopt an existing decentralized cryptocurrency.
The Central Bank of Honduras initiated an investigation to determine the feasibility of a pilot test, issuing its CBDC. The president of the Central Bank of Honduras, Wilfredo Cerrato, announced that information in the city of Tegucigalpa.
Integrating a new form of currency into their financial system without prior preparation does not move central banks. As the formation of the Honduras committee occurred just six months ago, it will take a long time to complete the investigation phase.
Interest in central bank digital currencies is becoming more prevalent all over the world. For example, Nigeria had scheduled the launch of its CBDC the eNaira on October 1st, but the authorities postponed it. Likewise, the Ukrainian government has advanced its plans, authorizing the National Bank of Ukraine to issue a central bank digital currency.
Advocates for CBDCs usually highlight two advantages to implementing that kind of money. They mention higher speed and security when paying, as well as efficient implementation of new monetary policies. The latter include the manipulation of interest rates directly in user accounts.
Of course, CBDCs involve a high level of control from the governments that issue them. For example, China wants to implement the eYuan as it will allow them to track the transactions made by the population.
By Alexander Salazar