WASHINGTON – Federal Reserve chairman Jerome Powell said he is more worried about the risk of a large-scale cyberattack than another financial crisis like that of 2008.
The risks of a 2008-like crisis with a need for government bailouts of banks are “very, very low”, said the head of the United States central bank during an interview aired yesterday on CBS’ 60 Minutes.
“The world changes. The world evolves. And, the risks change as well. And I would say the risk that we keep our eyes on the most now is cyber risk,” he said, adding that the concern is shared by multiple governments and private businesses, particularly in finance.
Additionally, these organisations invest the most against cyberattacks, he said.
Powell stressed that the Fed is considering different types of scenarios.
“There are scenarios in which a large payment utility, for example, breaks down, and the payment system can’t work. Payments can’t be completed. There are scenarios in which a large financial institution would lose the ability to track the payments that it’s making and things like that.”
The Fed is also looking at the possibility that part, or even a large part, of the financial system could shut down.
“We spend so much time and energy and money guarding against these things,” said Powell, noting that cyberattacks on major organisations happen “every day”.
Digital dollar
Powell was asked about the possibility of creating a digital dollar, as China last month became the first global economic power to unveil a cryptocurrency.
He said for now, the Fed is evaluating the possibility.
“We feel it’s our obligation to understand it. How would it work? What would the features of it be?”
He said the central bank is developing software and even designing the look of a digital US dollar, but the final decision on whether to make it public will be made only once its impact is fully understood.
The dollar is “the world’s reserve currency. The dollar is so important... We do not need to be the first ones to do this. We want to get it right. And that’s what we’re going to do”.
Last October, he indicated that the US is thinking about issuing its own cryptocurrency, but warned that a full assessment of the benefits and risks will take time.
But the creation of a digital dollar could benefit the US economy, said Treasury Secretary Janet Yellen in a New York Times interview published on February 22.
She highlighted the need for central banks to properly assess the associated issues, particularly consumer protection.
Regarding the US economy, Powell said it is “at an inflection point” – growth and employment will accelerate in the coming months, he predicted.
But, he once again insisted that the Covid-19 pandemic continues to present a risk. – AFP, April 12, 2021
