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US wholesale CBDC has ‘promise,’ Fed governor says, but retail ‘difficult to imagine’

Press Releases Crypto News Cointelegraph US wholesale CBDC has ‘promise,’ Fed governor says, but retail ‘difficult to imagine’

United States Federal Reserve Board governor Michelle Bowman spoke at Georgetown University on April 18 to “offer a perspective” on central bank digital currency. The Fed plays an important role in the conversation about CBDC, Bowman said. Her examination of the problems a CBDC might solve and the design and policy issues it entails showed little enthusiasm.

Bowman expressed doubt about the need for a CBDC to improve the payment system or its ability to enhance financial inclusion in the United States. A CBDC would have to beat the performance of the new FedNow system to earn a place on the market, and the 4.5% of Americans who do not have bank accounts are unlikely to want to use a CBDC. Bowman added:

“Unbanked households are also less likely to own mobile phones or have access to the internet, which would present barriers to CBDC adoption.”

Bowman also took a dim view of CBDC as an implement of policy. She saw the programmability of a CBDC as a “stark contrast to the flexibility and freedom embedded in physical currency or bank deposits” that could be misused. Furthermore:

“There is also a risk that this type of control could lead to the politicization of the payments system and, at its heart, how money is used. A CBDC that permitted this type of control […] could also threaten the Federal Reserve’s independence.”

Speech by Governor Bowman on the considerations for a central bank digital currency: https://t.co/WLK1vp7hlb

Watch live: https://t.co/nurl0Ods5G

— Federal Reserve (@federalreserve) April 18, 2023

Fear of the unknown colored several of Bowman’s conclusions. Cross-border payments would require a regulatory framework to be created, stablecoin may provide an alternative, depending on future legislation, and user privacy could be at risk from CBDCs, she said, without much further consideration. Newly announced U.S. stablecoin legislation would give the Fed control over non-bank stablecoin issuers.

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Author: Derek Andersen

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