The head of the Federal Reserve System, Michel W. Bowman, said that the advantages of the central bank’s digital currency (CBDC) are more likely to exceed the risks associated with its use.
Source: motionarray.com
The head of the Federal Reserve System said this last Tuesday, April 18, during a speech at Georgetown University. He also noted that, in his opinion, in the future, wholesale CBDC may have prospects for settlements on certain transactions in the financial market and processing international payments.
Bowman stated that from the point of view of broader design and financial policy issues, especially in terms of ensuring the safety of confidential consumer data and the impact on the banking system, it is difficult to imagine a compromise between the benefits and unintended negative consequences in the case of using CBDC for operations that do not go beyond wholesale and interbank transactions.
At the same time, the head of the Federal Reserve System noted that the study of the potential of the digital currency should be continued, but there are cases when CBDC will not solve certain problems of the financial system. For example, some hope that the new generation currency will speed up payments while reducing costs and friction, which can be achieved with the upcoming launch of the FedNow service by the Fed.
Bowman separately stressed that in the United States, many believe that digital currency will improve access to financial services, but at the same time, 95% of American households have at least one member with a bank account, and the rest either do not need it or have concerns due to the low level of trust in financial institutions. He noted that those who are skeptical about the capabilities of banks in the field of security are unlikely to perceive the government as a more reliable guarantor.
It is also widely believed in the United States that the use of CBDC can contribute to the achievement of political goals. In this case, it means the provision of state benefits or payments of a different nature for a certain period. Bowman says that such limits contrast sharply with the flexibility and freedom provided by physical money and bank deposits.
The US Congress will soon also consider the prospects for the introduction of CBDC. Part of the crypto legislation includes a request from the US Treasury Department to study the feasibility and operational impact of the digital dollar.
As we have reported earlier, Bank of England Builds Its CBDC Team.
