"Still Getting Your Head Around Digital Currency? So Are Central Bankers." Talks with DCI's Neha Narula

If you are trying to grasp Bitcoin and understand what China’s digital yuan means, America’s Federal Reserve is right there with you.

By: Jeanna Smialek - April 26, 2021

America’s Federal Reserve says it is in no rush to issue a digital currency, but it is coming under intense and increasing pressure to research and understand the design and potential of digital money.

From the Bahamas to China, global central banks are experimenting with digital offerings, fueling concerns on Capitol Hill that the Fed might fall behind the competition. And breakneck innovation in the private sector suggests that the Fed, a key financial regulator, needs to understand budding private digital payment technologies.

Yet huge questions persist about a central bank digital dollar — such as, “What problem would this solve?” and, “How would it work?” Jerome H. Powell, the chair of the Fed, has been clear that while research is well underway, the Fed has a big responsibility as steward of the U.S. dollar, the world’s dominant currency. It would not issue a digital version of U.S. currency without congressional approval, and it is in no hurry to upend the existing monetary system before it fully understands the consequences.

“Does the public want, or need, a new digital form of central bank money to complement what is already a highly efficient, reliable and innovative payments arena?” Mr. Powell asked at an event in March. It’s a tricky question, and the central bank doesn’t seem to have a clear answer yet. Here’s why…

Jeanna Smialek writes about the Federal Reserve and the economy. She previously covered economics at Bloomberg News, where she also wrote feature stories for Businessweek magazine. @jeannasmialek

A version of this article appears in print on April 27, 2021, Section B, Page 1 of the New York edition with the headline: The Fed Grapples With Digital Currency.