ST. LOUIS (Reuters) - It is “inevitable” that central banks including the U.S. Federal Reserve will start issuing digital currency, Philadelphia Federal Reserve bank president Patrick Harker said on Wednesday, while cautioning that the United States should not be the nation to lead such a move.
“Frankly I don’t think we should be the first mover as a nation to do this,” Harker said at a community banking conference here, given the dollar’s role as the world’s reserve currency and the need to test out new technology. But he added: “It is inevitable ... I think it is better for us to start getting our hands around it.”
His comment came in response to a question about the Fed’s decision to create its own real-time payments system.
Harker said with the so-called “FedNow” service in the works, “I am looking at the next five years after that. What comes next? I do think it is something around digital currency.”
The Fed and other central banks are debating both how to approach the rise of privately issued cryptocurrencies like Bitcoin, and examining how the underlying blockchain technology might change traditional central banking.
The general mood is skeptical - about whether private cryptocurrencies will ever become large enough, or behave enough like true currencies, to require regulation, or to threaten the ability of traditional central banks to conduct monetary policy.
“We’re a long way from that,” Fed Chair Jerome Powell said in June, describing the technology as in its “infancy.” Other Fed officials have said that the benefits of a central bank issued digital currency were “not obvious.”
But there is also concern, particularly over Facebook’s potential to pull a large financial consortium together behind its Libra initiative. And globally, other central banks and institutions including the Bank for International Settlements have begun to take the possible spread of central bank digital currencies as more of a possibility.
Harker acknowledged his view was “in the minority” at the Fed right now. But his staff has begun research on the issue, and he said he is organizing a small research conference for academics to be held early next year.
Reporting by Howard Schneider; Editing by Kevin Liffey and Andrea Ricci