Central Bank Digital Currencies ‘A Solution in Search of a Problem’ -Waller
There is no need for the Federal Reserve to issue a digital currency and calls for it to do so need to be further studied before taking the step, Federal Reserve Governor Christopher Waller said Thursday.
“After exploring many possible problems that a central bank digital currencies (CBDC) could solve, I am left with the conclusion that a CBDC remains a solution in search of a problem,” Waller said in a speech to American Enterprise Institute. CBDC stands for central bank digital currencies.
Federal Reserve Chair Jerome Powell announced last week that the Fed is planning to publish a research paper on the issue in the near future.
Arguments in favour of a CBDC, including claims it could replace the shrinking pool of cash with a digital equivalent, aid the unbanked, reduce costs by forcing commercial banks to compete for customers, and preserve the US dollar’s reserve status, were all found lacking by Waller.
Much private-sector innovation in payments processing has taken place in the absence of a CBDC, Waller noted. And while a central bank digital currency would likely make it easier to monitor private financial transactions, existing regulation makes it unnecessary to create a CBDC for that reason, he said.
“I am not convinced as of yet that a CBDC would solve any existing problem that is not being addressed more promptly and efficiently by other initiatives,” Waller said.
In fact, the risks may outweigh the benefits, he noted.
“The competition of a Fed CBDC could disintermediate commercial banks and threaten a division of labour in the financial system that works well,” Waller said. “And, as cybersecurity concerns mount, a CBDC could become a new target for those threats.”
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Central Bank Digital Currencies ‘A Solution in Search of a Problem’ -Waller
