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As World Accepts CBDCs, Digital Dollar Debate Shifts

by CBDC Insider
August 30, 2022
in Business, US
Reading Time: 2min read
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As World Accepts CBDCs, Digital Dollar Debate Shifts
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Federal Reserve Board of Governors member Michelle Bowman said two weeks ago that the imminent launch of the FedNow real-time payments system makes a digital dollar unnecessary. It doesn’t matter.

Central bank digital currencies (CBDCs) have reached a critical mass, and enough major economies are challenging the greenback’s status as the world’s reserve currency (and all the power that comes with it) to shift the debate to matters of national prestige.

Saying that her “expectation is that FedNow addresses the issues that some have raised about the need for a CBDC,” Bowman said the service will “will help transform the way payments are made.”

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That, and concerns about privacy and competition with the private sector — traditional banks as well as FinTechs and stablecoins — is the core of the “no” side of the argument.

The yes side, Federal Reserve Board of Governors Vice Chair Lael Brainard said in a July 30 speech, is that the “dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn’t have one … that just doesn’t sound like a sustainable future to me.”

The worst position to be in, she said in May, is for Congress to find itself telling the Federal Reserve in five years, “you need to catch up. China’s out there, the [European Central Bank] is out there.”

Then there’s House Financial Services Committee Chair Maxine Waters, who said July 27 that a stablecoin regulatory bill she hopes to get before the committee in the next few weeks will also “require the Federal Reserve to research and develop a central bank digital currency, so we remain competitive globally.”

Others, like Financial Services ranking minority member Patrick McHenry, are more skeptical and are concerned about privacy, bringing the Fed into retail banking, and stifling private-sector innovation. Then there’s the banking industry, which sees CBDCs as a huge threat to its business model.

“There is a ‘don’t take my cheese’ opposition coming largely from the banks who view the CBDC as a potential disrupter of their very profitable payment systems,” Rep. Jim Himes, who is a CBDC supporter, told Politico.

Read more at pymnts.com

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