Chris Hughes’ op-ed “Fed CBDC is no answer to China’s financial might” (Opinion, May 12) overlooks the current landscape of central bank digital currency (CBDC) both in the US and globally. China’s development of a CBDC is not the primary motivation for developing a US version. Instead, it’s what the rest of the world is doing that has captured attention in Washington.
As Atlantic Council research has shown, there are now 90 countries exploring the use of a CBDC. President Joe Biden’s executive order on digital assets points out that as the issuer of the world’s reserve currency, the US should play a leading role in international standard-setting for these rapidly evolving tools. Otherwise, the Federal Reserve will be operating in a more fragmented international financial system. Hughes correctly states that an “uncapped” CBDC could pose a systemic risk to financial institutions.
That is precisely why every country that has deployed or is piloting a CBDC caps the holdings of all users and works through the commercial banking system. Nigeria, the largest economy to make a CBDC available to every citizen, is just the most recent example. CBDCs are not without risks — just consider the threat of a cyber attack on a digital currency — but risk of inaction is even higher. That is why the Fed, the European Central Bank, the Bank of England and others should continue with their progress on CBDC development and not be overly concerned with China’s version.
If these central banks can design a digital currency that protects privacy and delivers faster payments, the entire global financial system will be more inclusive and more secure.