Federal Reserve Board chairperson Jerome Powell released a lengthy video and statement Thursday issued a lengthy video and statement announcing that it will be more involved in cryptocurrencies and might even develop its own digital currency in the future.
Along with further cryptocurrency research, Powell said that the Federal Reserve would release a discussion paper this summer that will examine the implications of rapidly emerging technology for digital payments, with a specific emphasis on the possibility of issuing a U.S. central bank digital currency.
"As the central bank of the United States, the Federal Reserve is charged with promoting monetary and financial stability and the safety and efficiency of the payment system," Powell said Thursday.
"To date, cryptocurrencies have not served as a convenient way to make payments, given, among other factors, their swings in value. Nonetheless, coins tied to the value of the dollar or another currency -- known as 'stablecoins' - have emerged as a new way to make payments."
Powell said the Federal Reserve intends to play a "leading role" in the creation of international standards as central banks around the world, most notably China, make moves in the digital currency domain. Some are concerned that China's development of its own digital currency, a first for a major economy, would weaken the global strength of the dollar.
While highlighting the potential advantages of cryptocurrencies and "stablecoins," Powell cautioned that they "may also carry potential risks to those users and the broader financial system."
Any development of a central bank digital currency in the U.S., he said, would necessitate "careful thought and analysis," emphasizing the need to integrate it alongside the U.S. dollar in existing payment systems.
Powell's remarks came only hours after the Treasury Department announced new bitcoin rules, requiring any payment worth $10,000 or more to be disclosed to the Internal Revenue Service as part of a larger attempt to combat tax evasion.
The Federal Reserve is collaborating on the project with a number of organizations, including the Bank for International Settlements. CNBC says the Boston Fed is in charge of the project.
