This article is posted in Forbes and is a summary of a recent speech made by one of the Fed governors, and then a review of the various points of contention. We have been covering CBDCs here and elsewhere, and have pointed out the skepticism around the currency coming out of the Fed recently, as other countries are actively testing and piloting their own CBDC. This anti-CBDC rhetoric is interesting, in that it precedes what is expected to be a Fed position paper on the topic to be released in September. Perhaps these type of speeches are a precursor. In any event, the author of the piece covers the various aspects of the topic.
‘The speech reveals that as an advocate of alternative currencies, Gov. Waller is skeptical of the concept of CBDCs. The word concept is used deliberately here, since no CBDC at scale has yet been released. It is known through the Bank of International Settlement (BIS) surveys that 80 or more Central Banks are at researching the concept. The cbdc tracker shows the state of play. Some are pretty advanced, with the Chinese poised to release e-CNY soon, backed by multiple experiments at increasing scale. Waller does not see any problem which CBDC would solve. The provocative title of the speech is “CBDC: A Solution in Search of a Problem”. The main point of the speech is that there is no problem to be solved by CBDC, hence the Fed should not issue it. Gov. Waller’s speech echoes a speech made by the Fed Board Vice-chair Randall Quarles. Both governors base their arguments on what they say are the excellent state of payment systems in the United States.’
The author does a good job of breaking down the various aspects of the CBDC debate, and provides counters to the various positions take by Fed Governor Waller. So readers interested in the topic should take the 10 minutes required to absorb the piece. One example is Waller’s suggestion that inclusion is not really a big deal in the U.S., since based on the last FDIC survey, the number of unbanked households in the country has dropped to 5.4%, most of whom do not want a bank account anyway. The author counters that with some other factors. Waller also says that payment systems in the U.S. are good and getting better. The author also challenges that. Again, worth a read.
‘Payment systems have been run by the Fed for decades, they also collaborate with federal agencies like the mint to print and distribute cash. This indicates that the Fed is very competent in managing physical and cyber risks. There are no risk free systems, continuous monitoring, rapid upgrades and other well recognized risk mitigation methods can be used to limit the radius and extent of damage wrought by deliberate or accidental breaches. If risk is the only criterion used, no significant project can be executed.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
