Fed Chair Jerome Powell says central bank-backed digital currencies must coexist alongside cash and other forms of money

• Fed Chairman Jerome Powell said potential central bank digital currencies must coexist with cash.
• COVID-19 has brought forward the need to address the limitations of current payments, he said.
• Achieving an improved payments system would require multiple stakeholders to collaborate, he said.

Federal Reserve Chairman Jerome Powell said on Thursday prospective digital currencies issued by central banks must accompany cash and other types of money within a flexible payment system.

"A recent report from the Bank for International Settlements and a group of seven central banks, which includes the Fed, assessed the feasibility of central bank digital currencies (CBDCs) in helping central banks deliver their public policy objectives," Powell said in prepared remarks at a payments conference hosted in Basel, Switzerland.

"One of the three key principles highlighted in the report is that a CBDC needs to coexist with cash and other types of money in a flexible and innovative payment system."

The COVID-19 crisis has underscored the less systematic areas of the current payment system and sped up the need for digitalization, he said. The Federal Reserve Bank of Boston is said to be collaborating with MIT researchers to explore digital currencies in addition to experiments the Fed's board of governors is conducting.

Powell was addressing attendees at a conference aimed at discussing improvements in cross-border payments hosted by the Committee on Payments and Market Infrastructures.

"By definition, cross-border payments involve multiple jurisdictions," he said. "So it will only be through countries working together, via all of the international forums-the Group of Seven, the G-20, the CPMI, the FSB, and others-that solutions will be possible."

He said that achieving an improved payments system would be made possible through the combined engagement of policymakers, private-sector participants, and academia.

Powell recently said that a potential digital dollar is a "high priority" project for the US, although that comes with notable technical and policy-related issues. As the issuer of the world's reserve currency, the US doesn't have to be the first to create one, but it does have to get it right, he said.