FED Chair Jerome Powell Proposed Wholesale CBDC Implementation Could Bypass Congress

In a recent House Committee on Monetary Policy hearing, Federal Reserve Chair Jerome Powell proposed that the implementation of wholesale central bank digital currencies (CBDCs) could potentially bypass the need for congressional approval.

While Powell has previously stated that the issuance of retail CBDCs would require authorization from Congress, he explained that wholesale CBDCs may fall into a gray area.

During the hearing, Rep. French Hill (R-AR) questioned Powell about the authorization process for issuing a central bank digital currency (CBDC). “You’ve testified many times before that to issue a CBDC that should be authorized by Congress. Is that still your testimony?” Hill asked. In response, Powell stated, “It is absolutely the case as it relates to retail CBDCs. There are potential forms of wholesale CBDCs that we would need to look at, it’s less clear. We’ve always been talking about retail CBDCs, and that’s something that would certainly need congressional approval.” Powell went on to explain that a retail CBDC would be like a bank reserve, and that there are valid reasons for exploring the need for such a currency.

Also Read: Bitcoin, Ethereum, Dogecoin Fall On Powell’s Jolt: Analyst Sees More Crypto Struggle If ‘Wave Of Risk Aversion’ Doesn’t Pass

During the hearing, Powell also expressed his support for a regulatory framework for digital assets, stating that it would provide transparency and rules for consumers, investors, and developers. He emphasized that the safe participation of banks in blockchain-based businesses and tokenized payments is a key consideration.

When asked about the potential parameters for issuing a CBDC without direct statutory authorization from Congress, Powell suggested that a wholesale CBDC could be used as a blockchain-based settlement mechanism between banks, similar to a bank reserve. He stated that the need for a wholesale CBDC is still being evaluated.

Congressman Hill asked Powell if a blockchain system could be used between banks and the Fed for settling transactions with the Fed’s CBDC token. Powell responded sharply with a simple “Yes.” Powell’s suggestion that wholesale CBDC implementation may not require congressional approval highlights the ongoing debate surrounding the issuance of digital currencies by central banks. While retail CBDCs could have far-reaching implications for monetary policy, wholesale CBDCs may offer more immediate benefits for financial institutions.

Now Read: Crypto Chaos: FDIC Officials Swarm Silvergate Capital In Desperate Bid To Avoid Shutdown