The potential launch of a central bank digital currency (CBDC) in the U.S. has become a major talking point in the current election cycle, but concerns about the imminent launch of a digital dollar are overblown, according to Thursday’s testimony from Federal Reserve Chair Jerome Powell before the Senate Banking Committee.
While speaking during his second day of testimony regarding monetary policy, Powell said the Fed has not considered the release of a digital dollar anytime soon.
"We're nowhere near recommending – or let alone adopting – a central bank digital currency in any form," Powell said. “People don't need to worry about it."
He also addressed concerns that the potential future release of a digital dollar would give the Fed a direct line into tracking the spending habits of Americans, allowing the central bank to make politically motivated decisions to cut some people off if they behave in a manner that they don’t approve of.
"If that were a government account, that the government would see all your transactions, that's just something we would not stand for or do or propose here in the United States," Powell said. He added that the Fed would enlist the banking system to manage people’s accounts, just as they do currently.
He contrasted the Fed’s approach to what has been seen in China, where a social credit system that monitors citizen's daily activities can result in them being banned from accessing certain services if they go against prescribed norms.
"If we were to ever to do something like [a CBDC] – and we're very long way from even thinking about it – we would do this through the banking system," Powell said. "The last thing we would want with the Federal Reserve would be to have individual accounts for all Americans, or any Americans for that matter."
While Powell and other officials have repeatedly pushed back against concerns around the creation of a digital dollar, the topic has become a point of focus for many on the Republican side of the aisle, including former President and current Presidential candidate Donald Trump, who vowed to “never allow” the Federal Reserve to create a central bank digital currency if he is re-elected.
“Tonight I’m making another promise to protect Americans from government tyranny,” Trump said during a campaign rally in January. “I will never allow the creation of a central bank digital currency.”
Presidential candidate Robert F. Kennedy Jr. has also pushed back against a U.S. CBDC, warning that it would allow the government to know about any single transaction a citizen makes, which would open the door to blackmail and other abuses.
“It [a CBDC] is a calamity for human rights and for civil rights,” Kennedy said, giving the example of China’s digital yuan, which he said allows the government to “shut off” an individual’s access to their funds if the street surveillance cameras detect any form of non-compliance.
Kennedy vowed to end “the efforts to move toward a CBDC” if he became president and said he would do everything he could to maintain paper cash.
Multiple officials have maintained that the Fed is merely studying the idea of a digital dollar as CBDC exploration and adoption spreads across other jurisdictions, including Europe and the UK. Trump and others insist that a digital dollar is the ultimate goal in the government's plan to spy on people's transactions.
Powell previously testified before the Senate Banking Committee that the Federal Reserve is legally unable to launch a digital dollar without Congressional approval, and he reiterated that position during his testimony on Thursday.
"Do you still agree that the Federal Reserve cannot introduce a U.S. central bank digital currency without congressional authorization?" Sen. Cynthia Lummis (R-WY) asked.
"Yes, I do," Powell responded.
