Kansas City Fed President Esther George said Monday that the Federal Reserve is continuing its research on central bank-issued digital currencies, but that there are no plans at the moment to actually launch one in the U.S.
“I think it’s prudent that we do our homework and think about what that entails,” George told Yahoo Finance at the Sibos conference organized by the Society for Worldwide Interbank Financial Intermediation (SWIFT).
For the last few years, the Fed has been conducting “in-house experiments” on the use cases for distributed ledger platforms. But the central bank is now extending its research by looping in the Massachusetts Institute of Technology to actually build and test a hypothetical digital currency.
Fed Governor Lael Brainard, who has headed efforts on central bank digital currencies alongside George, said in August that their interest is focused on the “opportunities and limitations of possible technologies.”
Although the Fed is not committing to launching its own digital currency, the central bank is charging ahead with its efforts to bring real-time payments to the United States. While services like PayPal-owned (PYPL) Venmo and Cash App are designed to offer quick peer-to-peer payments, check clearing still takes days for funds to arrive at one’s checking account in the U.S..
“Building the highways on which those payments can run and actually settle in real time became an increasingly obvious need for the country and that’s the one that we’re focused on right now,” George said.
The Fed hopes to stand up its FedNow system to allow 24/7 real-time payments by 2023 or 2024. George said the project is “on track” with that timeline, but said the Fed hopes to have basic functionality on day one with additional features rolled out after the fact.
The U.S. finds itself lagging other countries on payments infrastructure. Mexico, for example, already has a real-time payments system and last year launched a Cobro Digital (CoDi) system that allows users and merchants to transact in digital pesos using QR codes.
Although many central banks are researching digital currencies, only about 10% say they will actually issue one of their own in the short-term, according to the Bank of International Settlements.
Brainard has said the Fed would specifically pay mind to “legal considerations” over whether it has the statutory authority to actually issue a digital currency.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
Powell warns of 'weak recovery' if policymakers provide 'too little' COVID-19 relief
Fed still faces questions on how high, how long it will let inflation rise
A glossary of the Federal Reserve's full arsenal of 'bazookas'
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.