During testimony before Congress this week, Federal Reserve Chair Jerome Powell stated that his “mind is open” about the adoption of a “digital dollar.”
Across the globe, central bankers are considering central bank digital currencies (CBDCs) as an alternative other digital assets — such as cryptocurrencies, which are virtual coins kept anonymous and protected from counterfeiting via encryption, and stablecoins, which are cryptocurrencies that attempt to peg themselves to another asset such as gold or the dollar.
Nations such as China, Ecuador, Thailand, and Saudi Arabia have discouraged the use of cryptocurrency while creating their own CBDCs. Although the Fed planned to issue a report about a potential “digital dollar” this month, Powell said that the central bank’s findings will be delayed until early September.
Most CBDCs mimic cryptocurrencies — including Bitcoin — through their use of blockchain technology, with the added benefits of stability and widespread acceptance. However, users of CBDCs would potentially lose the benefits of the decentralization and anonymity