U.S. Markets

Fed's Powell: Digital dollar may require some congressional approval

FILE PHOTO: Federal Reserve Chair Jerome Powell (L) and former Treasury Secretary Steven Mnuchin prepare to speak during a House Financial Services Committee hearing on "Oversight of the Treasury Department's and Federal Reserve's Pandemic Response" in the Rayburn House Office Building in Washington, U.S., December 2, 2020. Jim Lo Scalzo/Pool via REUTERS/File Photo

(Reuters) - Federal Reserve Chair Jerome Powell on Wednesday said some form of congressional authorization may be needed for the central bank to proceed with any development and roll-out of a digital version of the U.S. dollar.

The Fed expects this year to be an important one for the development of a digital U.S. currency, Powell said in response to a lawmaker’s questions during testimony before the House Financial Services Committee, especially in its engagement with the U.S. public on the matter.

The Fed and a number of other monetary authorities and governments around the world are working to develop digital versions of their so-called fiat currencies, partially in response to the rapid growth of alternatives such as bitcoin.

Powell said the Fed this year will be looking at the “challenging” policy and technical issues associated with a digital version of the dollar, a matter made more complex by the dollar’s status as the world’s reserve currency. The Fed will be careful that its actions do not undermine the functioning of key markets that are largely priced in dollars, he said.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama