US Congressman Bill Foster challenged Federal Reserve Chair Jerome H. Powell on the progress of the US Central Bank Digital Currency (CBDC), during a monetary policy hearing earlier today.
Foster questioned whether establishing a digital dollar was key to ensuring the US dollar’s service as a global financial reserve. He said:
“Do you think that establishing a digital dollar would help ensure that the U.S. dollar; continues to serve as the core of the U.S. and the world’s financial system?”
US CBDC Wouldn’t Provide a Difference
Meanwhile, Powell nodded in agreement as to the role of the US dollar to the country’s financial system. He said that a single government currency was particularly important and had served well since inception. However, Powell was a bit cautious about an eventual US CBDC claiming:
“Whether a digital currency moves us along that path is an open question, every current central bank is taking a deep look at that.”
Foster was however adamant on how his government would respond to China’s potential threat after creating the digital renminbi. He also added that the Asian economic powerhouse was in a better position to scale its digital stablecoin through its established mobile payment system.
However, Powell clarified that China and the United States were completely two different institutions by the context of creating a central digital currency.
Challenging the US Dollar
The Chinese government is currently in the final stages of rolling out its digital yuan. Nevertheless, it seems the eventual concept, design and launch of a digital yuan is based on complaints about the reliance on the US dollar as a financial reserve. Against this backdrop thereof, Beijing seems in a position to challenge the US dollar.
Therefore Foster seemed worried that the federal government wasn’t going to react, and provide a framework for its digital currency soon enough. Foster believes if China rolls out its CBDC, it is likely to gain an upper hand in global trade. In fact, he went on to cite Beijing’s involvement in the Belt and Road Initiative that would end up jeopardizing the dollar position as a global financial reserve.