Central Bank Digital Currencies Will Fix Bad Policy
The Federal Reserve and its peers would be able to tier interest rates to better target individual sectors of the economy.
Central banks want to get into the digital currency game.
Photographer: Samuel Corum/Bloomberg via Getty Images
More than 85% of the world’s central banks are working on central bank digital currencies, according to the Bank for International Settlements. The People’s Bank of China has already implemented a digital yuan, and the European Central Bank wants to launch a digital euro by 2025. Federal Reserve Chair Jerome Powell said Thursday that the central bank will launch a centerpiece research paper this summer on a digital currency. The Bank of England is looking into the matter as well.
Central bank digital currencies, or CBDCs, have the potential to revolutionize monetary policy. Rather than providing an alternative to national monetary systems, so-called GovCoins would mirror each country’s fiat currency, using blockchain technology to strengthen central bank oversight.