Yahoo Finance's Brian Cheung joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss the latest from Jerome Powell's speech to the International Monetary Fund and more.
ALEXIS CHRISTOFOROUS: First to Jay Powell, and the Fed chief spoke at the International Monetary Fund's annual meeting this morning about cross-border payments and digital currencies. And Yahoo Finance's Brian Cheung was, of course, listening in to all that. Good morning, Brian. I guess just the mere presence of the Fed chief at this meeting today legitimizes a lot of these digital currencies.
BRIAN CHEUNG: Good morning, Alexis. Yes, absolutely the case that a lot of attention on Fed Chairman Jay Powell's remarks this morning. I do want to caution that there wasn't anything in this speech with specificity to monetary policy or the economic outlook. As you mentioned, this was focused a bit in the weeds on whether or not the United States could issue a digital dollar, which could perk the ears of anyone interested in the digital currency space. The Fed chairman insisting that while the Fed is doing research on the possibility of issuing a digital dollar, that the Federal Reserve is not committing to issuing what they call a central bank-issued digital currency. Here's what he had to say at the IMF this morning. [VIDEO PLAYBACK]
- We have not made a decision to issue it, a CBDC. And we think that there is a great deal of work yet to be done as well as extensive public consultation to be had with all stakeholders before making such a decision. The dollar is the world's principal reserve currency, as you pointed out, and I assure you that we will be approaching this question with great care.
BRIAN CHEUNG: --care. Chairman Powell also saying that there are issues and quote, "difficult policy and operational questions" like the monetary policy implications of a digital dollar, how might that affect the Federal Reserve's efficacy in using interest rates especially during recession times like the ones that we're in right now, In addition to questions about how you could police illicit activity, anti-money laundering, or just defend yourself against cyber attacks if there were to be a digital dollar.
But the Fed chairman emphasizing at the very beginning of his remarks that this would be a complement to cash. This is not-- does not mean that fiscal cash will not be in circulation anymore, but just merely saying that if the Fed were to implement this-- again not a guarantee-- but if they were to do this, this would be a compliment to hard cash.
ALEXIS CHRISTOFOROUS: Brian, did he mention at all on Facebook's payment system? Remember, there was a big hullabaloo about Libra, they called it. There was supposed to be a lot of regulation around it. Did he mention that at all?
BRIAN CHEUNG: (LAUGHING) Well, Alexis, it doesn't seem like that long ago that it was Libra that was one of the largest headlines, obviously before the pandemic and everything else that's happened after that. But again, referring to Facebook's project aspiring to have some sort of international network of digital currencies. The Fed chairman saying that Libra is indeed one of the reasons why central banks around the world have had a renewed interest in maybe issuing their own private digital currencies.
Now how this would work with Libra is, you know, an open question. This is very much in the early stages of development, but merely saying that the idea of Libra shows that there's a use case for trying to lower the barriers to specifically cross-border payments. Keep in mind that right now it's fairly difficult and also expensive to try to wire money from one country to another country on the other side of the planet-- hoping that maybe there's a way that some sort of stable-point infrastructure with central banks around the world could reduce some of those frictions.
Now again, the Federal Reserve not committing to launching its own digital currency, but saying that there could be some opportunity to quote, "coordinate or cooperate" with other sort of private players, not necessarily meaning Facebook but other types of private creators of maybe stable coins or this type of infrastructure, blockchain technology, to develop something. Again, no details on that right now, but just saying the Federal Reserve would be open to that. But again, very interesting to see how private movements in those spaces like with Facebook have really pushed the Federal Reserve and other central banks around the world to at least start thinking about these types of questions.
BRIAN SOZZI: Brian, any fresh comments on the stimulus front?
BRIAN CHEUNG: Nothing, no. No, not so far this morning. Again, a lot of eyes on that speech this morning, but no commentary from the Fed chairman with respect to that. It's possible we could get some commentary from others on the Federal Reserve Board this week. We do have some scheduled speeches from the likes of Vice Chairman Rich Clarida actually just later on this morning around 11:45 or so. Interesting to watch there because he's usually someone who focuses quite a lot on the outlook and the possible monetary-policy implications. We also have on dock some scheduled speeches from the vice chairman of supervision, Randal Quarles, in addition to obviously a number of other Fed officials throughout this week.