This article in Modern Consensus indicates that Fed Chairman Powell dislikes the idea of a central bank digital currency (CBDC) and thinks very highly of our hodgepodge U.S. payments market.
When Powell answered a question about the benefits and drawbacks of a CBDC, he spent four paragraphs listing serious problems, and one sentence about potential benefits. That amounted to conceding that a CBDC might lead to “safer, less expensive, faster, or otherwise more efficient payments.”
However, the reasons to create a CBDC largely apply to poorer, developing countries, he said. They included a slow and unreliable payments infrastructure and a large unbanked population, as well as consumers rapidly abandoning physical cash.
Those aren’t problems in the United States, Powell wrote.
“The U.S. payments landscape is highly innovative and competitive, with many fast, reliable digital options available for consumers,” he said. “That means the United States has no need for a CBDC at this time”, Powell added.
It is hard to understand how the Fed Chairman could consider the U.S. ahead of other countries in either faster payments or consumer payments. And if he thinks the U.S. payment system is inexpensive, he should go talk to a large merchant about its cost of payments!
The U.S. is in the process of deploying two real-time payment systems: Real-time Payments (RTP) and FedNow. Both utilize Real-time gross settlement (RTGS), which settles on an individual order basis. While these are not implementing digital currencies, they should exhibit similar, but not all, of CBDC benefits.
Overview provided by Tim Sloane, VP, Payments Innovation, Mercator Advisory Group
