Fed Chair Jerome Powell’s firm stance that a central bank digital currency will not happen under his watch aligns the U.S. with other nations that have been slowing their own CBDC developments.
While the Fed has no plans to pursue a CBDC, nearly a third of central banks worldwide have delayed their own digital currency initiatives, according to a survey of 34 central banks by the Official Monetary and Financial Institutions Forum.
The survey found that interest in issuing a CBDC has steadily declined. Some 18% of respondents said they are more inclined to issue one than in previous years, down from 38% in 2022.
Delays are largely attributed to concerns over regulatory and governance frameworks, as well as economic challenges that have taken precedence over CBDC development, the data shows.
Republican Opposition
The Republican Party, which has been vocal in its opposition to a CBDC, cites privacy concerns as a key issue. A year ago, five Republican senators introduced legislation to prevent the Biden administration from issuing a CBDC. At the time, Senator Tedd Budd of North Carolina stated that a CBDC would enable the federal government to monitor and control Americans’ spending habits.
In one of his first acts after regaining the White House, President Trump issued an executive order “prohibiting the establishment, issuance, circulation, and use of a CBDC within the jurisdiction of the United States.”
Given that the GOP currently controls all three branches of government, Powell’s statement may be as much an acknowledgment of reality as a strategic decision. He has noted that creating a CBDC would require an act of Congress—an unlikely prospect with a Republican majority in both houses.
Pilot Programs and Testing Continue
Despite notes of caution, exploration into the possibilities of CBDCs continues. Thus far, only three countries—Jamaica, the Bahamas, and Nigeria—have issued a CBDC, while 44 other nations have launched some form of pilot program, according to the Atlantic Council.
More than 40 major financial institutions are working with the Bank for International Settlements, a consortium of seven central banks that includes the Bank of England and the Federal Reserve Bank of New York, on Project Agora—the most comprehensive CBDC project to date. The Bank of England has taken the lead in exploring CBDCs, actively assessing their feasibility and potential benefits.
China’s digital yuan, e-CNY, may be the first major CBDC. It has been tested across several major cities, with millions of transactions processed during the recent Lunar New Year.
