Fed chair Powell speaks on digital currencies at IMF

Yahoo Finance’s Brian Cheung joins Zack Guzman to break down Fed Chair Powell’s speech at IMF's annual meeting.

Video Transcript

ZACK GUZMAN: I want to spotlight the moves we're seeing play out in the cryptocurrency market here as Bitcoin-- haven't talked about it in a while-- moves up more than 6% today. Of course, crypto had been hot earlier this year before we had all the pandemic talk about it. It had been hot when Facebook launched its Libra program there to try and explore what it could do with its own cryptocurrency efforts.

And the topic was brought up here in terms of where we go with digital payments at an IMF conference where Fed Chair Jerome Powell was speaking earlier this morning. And for more on that, I want to bring on Yahoo Finance's Fed reporter Brian Cheung, who has more around what he had to say. Brian.

BRIAN CHEUNG: Well, Zack, it's always difficult to attribute any movement in Bitcoin to any one event. But it is pretty notable when the world's most important economist, arguably, is talking about the, I guess, potential benefits of using a stable coin or digital currency.

So Fed Chairman Jay Powell at an International Monetary Fund panel this morning talking about how the Federal Reserve is continuing to explore the possibility of launching a US digital dollar that would be issued by the central bank, although the Fed has not committed to actually launching one, just merely researching it. But still, he said the Fed needs to be ahead of the game on at least this type of research. Here's what the Fed chairman said this morning.

JEROME POWELL: I feel that we have an obligation to stay on the forefront of policy and technological innovation and developments, as regards payments, cross-border payments, CDBC, all of those things, rather than that I felt anything needed to happen quickly or imminently. In fact, I actually do think this is one of those issues where it's more important for the United States to get it right than it is to be first.

BRIAN CHEUNG: And the Fed chairman also added in remarks this morning that he's open to having conversations with the industry, including private players, to try to see if they can develop this type of digital currency together. Again, the Federal Reserve has not committed to actually launching anything.

And Chairman Powell, for his part, saying, he has a number of concerns with trying to issue a central bank issue digital currency, one example being whether or not there are illicit activities, cyber attacks that could present risks to this type of technology, in addition to any sort of monetary policy implications.

Could a US digital dollar affect the ability of the Federal Reserve to use interest rates during downturns, like the ones that we face right now? And then other Fed governors in the past have raised concerns about whether or not the Fed even has the legal authority to do so.

So again, very early on. Too early to say if the Federal Reserve will actually do this. But the fact that they are looking into it at least has some cryptocurrency markets quite interested.