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Federal Reserve Governor Expresses Skepticism About the Utility of a US Central Bank Digital Currency (CBDC)

Federal Reserve Governor Expresses Skepticism About the Utility of a US Central Bank Digital Currency (CBDC)

Federal Reserve Governor Expresses Skepticism About the Utility of a US Central Bank Digital Currency (CBDC)

A Federal Reserve Governor isn’t convinced it’s worth it for the US to develop a central bank digital currency (CBDC).

Christopher J. Waller, one of seven members of the Fed’s Board of Governors, says in a new speech at a Harvard National Security Journal symposium that he believes the development of a CBDC will have little impact on ensuring long-term dominance the US dollar.

“Proponents of a CBDC tend to promote the potential of a CBDC to reduce friction in payments by lowering transaction costs, enabling faster settlement speeds and providing a better user experience. I am very skeptical that a CBDC alone can reduce traditional payment friction enough to prevent things like fraud, theft, money laundering or terrorist financing.

Although CBDC systems can automate a number of processes that partially address these challenges, they are not the only ones doing so. Significant efforts are being made internationally to improve cross-border payments in many ways. , and the vast majority of these improvements are not from CBDCs, but from improvements to existing payment systems.

According to Waller, even if non-US companies found a foreign CBDC to be technologically efficient, it would not undermine the broader factors behind the international value of the US dollar. Paper as reserve currency.

“Change in these factors would require major geopolitical shifts independent of CBDC issuance, including greater availability of attractive safe assets and liquid financial markets in other jurisdictions that are at least equivalent, if not better, than those in existence. in the United States.

The factors supporting the dollar’s primacy are not technological, but include the vast supply and liquid market for US Treasuries, which are comparable to those of the United States on these fronts, and a CBDC would not do anything about that change.

The Federal Reserve Governor does not believe that a US CBDC would offer a “material advantage” to foreign companies. and believes the launch of a digital dollar couldThe factors supporting the dollar’s primacy are not technological, but include the vast supply and liquid market for US Treasuries, which are comparable to those of the United States on these fronts, and a CBDC would not do anything about that change. raise concerns about money laundering and international financial stability.

Waller also doubts that stablecoins can undermine the dollar’s supremacy.

“I am not sure even a large stablecoin issuance may have more than a marginal effect. Commentators have often implied that private money, like tools like stablecoins, threatens the effectiveness of monetary policy. I don’t think so.’ Let that happen, and it should be noted that to date almost all major stablecoins are dollar-denominated and therefore US monetary policy should influence the decision to hold stablecoins in a similar way to the decision to own currency hold.

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