Quarles said he does not want to prejudge the process, but that he believes there is a “high bar” for digital money issued by the central bank.
Currently, the Fed directly issues physical dollars and digital bank reserves, but the money you spend when you swipe a credit card or perform a Venmo transaction goes back to the private banking sector. A digital currency would be like an electronic version of physical cash, in the sense that it would go back directly to the Fed. Proponents say it could improve financial inclusion and cross-border payments while protecting the dollar’s status as a leading currency. Opponents, including banks, warn that it could be a destabilizing development that would not generate benefits that the private sector could not achieve on its own.
His comments come as other central banks, and China in particular, are beginning to discuss or establish their own digital currencies. That has sparked interest in a Fed version, as lawmakers and financial policy experts worry the United States is left behind.
Quarles said he “would have to be convinced” that the use case outweighed the risks. He said it “seems unlikely” that the dollar’s status as the dominant global currency will be threatened by the digital currency of a foreign central bank, as its power is based on trade ties, deep financial markets, the rule of law in the states. United and it is credible. monetary policy of the Fed itself.
“None of these are likely to be threatened by a foreign currency, and certainly not because that foreign currency is a CBDC,” Quarles said.