US Congressman Challenges Fed Chair on Threat of China’s Digital Currency

United States Congressman Bill Foster (D-IL) has questioned the Chair of the Federal Reserve Jerome H. Powell on U.S’s central bank digital currency (CBDC) progress at a hearing on monetary policy earlier today.

Foster hopes for a digital dollar

Foster began his questioning by asking Powell:

“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?”

Powell agreed with the importance of the dollar to the U.S.’s financial system:

“I think having a single government currency at the heart of the financial system is something that has served it well, it’s a basic thing that hasn’t really been in question.”

As to the role of a CBDC in particular, Powell was cautious. “Whether a digital currency moves us along that path is an open question,” he said. “Every current central bank is taking a deep look at that.”

Foster urged the U.S government to address the CBDC issue sooner rather than later

While comparing with some existing CBDC projects, Foster asked Powell’s current plan in responding to China: “How would you characterize our ability to respond to this potentially competitive threat?”

Foster said that China was in a position to scale its digital Yuan by using their established cell phone payment system.

Responding to the questions, Powell pointed out that U.S and China are different when facing central digital currency: “They are a completely different institutional context.”

Foster also worried that if the Federal government doesn’t react and issue a plan for a digital currency quickly, potential competitors like China could roll out CBDCs and gain an upper hand. He specifically cited China’s plan to implement the digital Yuan among countries involved in its Belt and Road initiative, it could jeopardize the dollar’s world reserve currency status.