Jerome Powell Points out risks of New Digital Financial Products

Federal Reserve Chairman Jerome Powell said the central bank supports innovation in digital financial products, but warned that there could be "easily perceived risks" of some new technologies, including cryptocurrencies, which will require a regulatory overhaul.

Mr Powell said on Wednesday that some of these innovations would require changes to existing laws and regulations to ensure adequate oversight of the broader financial sector. He spoke during a discussion with other central bank governors hosted by the Bank for International Settlements.

Unlike private cryptocurrencies like bitcoin, a version of the Fed would be issued and backed by the US central bank, a government entity, much like US banknotes and coins.

Fed launched a review of the potential benefits and risks of issuing a US digital currency. The officials have been divided on the matter, making it unlikely that they will decide soon on whether to create a digital dollar.

Mr Powell also claimed that the Fed is just the beginning of this journey and that it had not made any decision about whether it would issue a digital form of the dollar. He did not say anything about the interest rate policy or the economic outlook in his remarks.