Fed Governor Opposes the Launch of a CBDC
- The US has sustained a strong interest in launching a CBDC, sparked by China’s successful attempt.
- Fed Reserve governor Waller believes a CBDC would have no impact on the long-term status of the dollar.
- Countries in Europe, Africa, Asia, and South America are all exploring the launch of a digital version of their currency.
Amidst the growing calls for a digital US dollar, Fed Governor Christopher Waller strongly opposed the launch of a central bank digital currency, CBDC, noting that such a move is not healthy for the long-term status of the US dollar. Waller expressed his views on Friday during an event organized by the Harvard National Security Journal.
Waller claimed that using a digital dollar would not be significantly better than using the U.S. dollars for payments, especially since using a CBDC would come with additional risks like cybercrime. The Federal Reserve governor was quoted saying,
I don’t think there are implications here for the role of the United States in the global economy and financial system.
Waller further noted that the conversation about a digital dollar should concentrate on innovations in payment systems, financial inclusion, and financial stability. He added that a CBDC would not improve the US’ economic presence on an international scale.
“The factors supporting the primacy of the dollar are not technological, but include the ample supply and liquid market for U.S. Treasury securities and other debt and the long-standing stability of the U.S. economy and political system. No other country is fully comparable with the United States on those fronts, and a CBDC would not change that,” Waller said during his speech.
Waller also expressed skepticism toward claims made by CBDC proponents that a digital currency would handle theft, fraud, and money laundering or enhance payments more than current technology. According to him,
Meaningful efforts are underway at the international level to improve cross-border payments in many ways, with the vast majority of these improvements coming not from CBDCs but improvements to existing payment systems.
The United States has joined the growing list of countries seeking to launch a CBDC. The trend began after China launched its digital currency, the digital Yuan, and witnessed huge support from its citizens. However, Waller believes China’s progress or that of any foreign nation has no effect on the United States.
Waller remarked that the effect of companies using a foreign CBDC that takes off will “likely only be on the margin because they rely on a large enough number of individuals and businesses being nearly indifferent between the dollar and the foreign currency in CBDC form.”
CBDCs are not the only digital assets of interest to US regulators. Lawmakers also identify stablecoins as a good asset class. However, authorities want to impose regulations on the industry before fully embracing them.