News from the US on Central Bank Digital Currency: For Federal Reserve Governor Michelle Bowman, CBDCs are not a solution compared to existing alternatives.
USA: Fed’s Michelle Bowman says CBDCs are no solution
Michelle Bowman, current member of the Board of Governors of the Federal Reserve (or Fed), said that she is still not convinced that the US central bank needs to issue a CBDC.
Specifically, Bowman believes that the central bank digital currency is not a solution that would address the identified problems more efficiently than existing alternatives.
In this regard, the Fed governor said:
“I have yet to see a compelling argument that a U.S. CBDC could solve any of these problems more effectively or efficiently than alternatives, or with fewer downside risks for consumers and for the economy,”
The problems Bowman is referring to are the arguments that CBDC supporters have instead been touting. For proponents, the US CBDC would remove friction in the payments system, promote financial inclusion and provide the public with quick access to central bank money.
Bowman cited the Fednow payment system as an example of improving existing infrastructure, while emphasising the risks of CBDCs disrupting the traditional banking system.
US: Fed governor highlights risks of CBDC
Basically, Bowman’s speech at Harvard Law School seems to suggest that the main risk of a US CBDC is its inherent feature, namely disintermediation.
For the Fed governor, it is disintermediation that could harm consumers and businesses.
Other risks highlighted by Bowman include the potential unintended consequences for the US banking system and major concerns about consumer privacy.
In this regard, the Federal Reserve chief believes that more research and development is needed on CBDCs before moving forward.
The political debate
Like it or not, the CBDC issue seems to be a big one in the US. Indeed, at the end of September, a political debate began over pending legislation on CBDCs.
The issue was raised by Maxine Waters of the Democratic Party, who accused Republicans who support crypto and decentralisation of being an obstacle to central banks issuing a CBDC.
Specifically, the bill in question was introduced by Republican Tom Emmer, who would like to see anti-cryptocurrency central banks.
For Waters, such a bill would be anti-innovation on the CBDC, as it would shut down the important work the Fed is doing to research a potential digital dollar. This proposal would also close the US race in the digital currency space against other countries that have already issued one.
On the other hand, Emmer defended his proposal and its use, stating that the bill is simply intended to block the administration’s efforts to release this financial surveillance tool.
Moreover, for Emmer, being in favour of crypto and blockchain does not mean supporting a central bank currency that will still be controlled by a government.