At a June 17 hearing before the House Financial Services Committee, Federal Reserve Chairman Jerome Powell spoke with Representative Tom Emmer (R-MN) on the issue of a central bank digital currency.

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Is there any progress on the digital dollar?

Emmer asked, „What recent substantive actions has the Fed taken to understand and experiment with this technology?“

Powell said that the Fed needed to be aware of the problem, but he didn’t really mention any substantive action:

„We owe it to the public we serve to keep up with it. If this is something that will be good for the U.S. economy and for the world’s reserve currency, which is the dollar, then we must be there and we must understand it first and best.“

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The controversy over private participation.
In the same round of questions, Powell stated that he was not interested in private sector involvement:

„The private sector is not involved in creating the money supply, that’s something the central bank does. …] I don’t think the public likes the idea that private employees who are not responsible for the public good are responsible for something so important.

Powell’s vision of a digital dollar clearly conflicts with, for example, the Digital Dollar Project. Emmer cited the project as a public-private partnership as the driver of a digital dollar.

Last week, the Congressional Fintech Task Force (of which Emmer is the ranking member) held a hearing on precisely this issue, with Digital Dollar Project founder and former CFTC president J. Christopher Giancarlo as a witness.

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A race against China
The issue of the digital dollar has received increasing attention as China seems to have its pilot of Bitcoin Loophole a digital renminbi ready.

Therefore, it may be an illusion or a political cover for the Fed to understand a CBDC first. Many see the US losing the race to China in a way that could cost the dollar its status as a global currency.