According to the president of the New York Fed, cryptocurrency raises difficult challenges for central banks.

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John Williams reacted to a presentation by Mark Carney, former governor of the Bank of Canada and the Bank of England, on the possibility of central banks producing digital currencies.

President of the New York Federal Reserve Bank, John Williams, believes the rise of cryptocurrencies offers a substantial challenge to existing laws, emphasising continuing policy conversations concerning blockchain technology and central bank digital currencies, or CBDCs.

Before central banks like the Federal Reserve can issue their own CBDC, several major questions pertaining to blockchain technology and regulation need to be addressed, Williams told a panel hosted by the Bank for International Settlements. Specifically, Williams said policymakers need to outline how blockchain-based payment systems would function alongside physical cash.

Williams is a member of this year’s Federal Open Market Committee, which is in charge of determining US monetary policy. Before deciding on monetary policy, the 11-member committee meets eight times a year to assess economic and financial developments. Williams and his colleagues decided earlier this month to keep interest rates steady.

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It is expected that central banks representing one-fifth of the world’s population would issue CBDCs over the next three years, however the speed and aim of the rollouts may vary considerably among jurisdictions. Because of local economic and financial situations, emerging economies have more reasons to pursue CBDCs, according to the Bank for International Settlements.

The Fed has already undertaken basic study on CBDC development, albeit no schedule for pursuing such initiatives has been established. Fed Bank of Dallas President Robert Kaplan stated in November 2020 that the central bank should start working on a digital currency as soon as feasible.

 

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