US Treasury Secretary Janet Yellen has said that developing a central bank digital currency – the digital dollar- could be years in the making, should the US pursue that end.
Yellen made the observation on Thursday during a presentation at the American University’s Kogod School of Business Center for Innovation in Washington.
The comments were part of a broader prepared in which the former Federal Reserve Chair touched on several topics, including digital assets, innovation, and regulation.
In her overview of the creation of a US central bank digital currency (CBDC), Yellen pointed to the recent executive order signed by President Joe Biden. In the order, the president tasks regulators to study the feasibility of having a CBDC, or digital dollar, even as they look on what is needed to improve the payments system.
“As a liability of the central bank, a CBDC could become a form of trusted money comparable to physical cash, but potentially offering some of the projected benefits of digital assets.”
As such, a digital dollar would offer benefits like an easy, fast and low-cost way to send and receive money.
Digital dollar ‘years, not months’ away
Among issues to be addressed in a report on the issuance of a digital dollar, Yellen says implications on the US payments system rank highest. Financial stability and financial inclusion are key points of reference for the administration, she added.
Other than that, there’s the need to look at potential implications on economic growth and national security, with financial crime also a pertinent issue. How the US digital dollar would “interact with existing national currencies, foreign CBDCs or private stablecoins,” also forms part of the discussion and consultations on the subject.
On what the report could hold, and when the US is likely to have a CBDC in place, Yellen noted:
“I can’t tell you yet what conclusions we will reach, but we must be clear that issuing a CBDC would likely present a major design and engineering challenge that would require years of development, not months.”
Regulators need to be ‘tech-neutral’
The former Fed chair’s remarks also touched on the regulation of digital assets, noting “regulation should be based on risks and activities, not specific technologies.”
According to her, regulators need to be ‘tech-neutral’ with things like consumer protection looked at, regardless of whether the assets in question are stored on a distributed LEDGER or balance sheet.
“The principle of tech neutrality is also applicable to concerns related to tax evasion, illicit finance, and national security – topics that are particularly pertinent in the world today,” she added.
Yellen has previously stated that the US will seek to avail a regulatory framework that supports innovation, even as authorities closely monitor the stablecoin market.
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