PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

The Fed’s CBDC Report Is Disappointingly Inconclusive

Steve Murphy by Steve Murphy
January 25, 2022
in Analysts Coverage, Digital Currency
0
The Fed's CBDC Report Is Disappointingly Inconclusive

The Fed's CBDC Report Is Disappointingly Inconclusive

0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

This release in Quartz is another take on the Fed’s discussion document on CBDCs that was issued last week and now awaits industry commentary. We had covered our perspective in a post the day after the Fed release and expressed a level of disappointment at the lack of specificity around research results from supposed testing scenarios underway for the past year+. In this case the author poses some of the same conclusions around Fed equivocation, reflected in the title.

‘The US Federal Reserve released its long anticipated report on the potential for a digital dollar last week. Those hoping the world’s most powerful central bank would revolutionize the way we exchange money were disappointed…

For starters, the Fed made clear that for now it is neither for or against launching a digital currency. And if it does decide to issue one, it wants banks to act as intermediaries, not unlike in the system that currently underpins most electronic transactions…

Dozens of central banks around the world have either launched or are exploring the idea of central bank digital currencies, or CBDCs, according to the Atlantic Council’s CBDC tracker. Proponents say this kind of digital money would be cheaper and faster than traditional payment systems, and more efficient for cross-border transactions…

But in several speeches, chair Jerome Powell has made it clear the Fed is operating from a place of confidence in the dollar’s status as the world’s reserve currency. In other words, it doesn’t want to create a CBDC for the sake of creating a CBDC.’

The author then goes on to discuss some of the general awareness things around CBDCs, including progress being made in multiple other global markets as well as reasons why these crypto accounts have generated so much interest, which we have been covering in member research now for quite some time. Reasons for the Fed’s hedging have been laid out in various press statements during the prior year, including from chairman Powell, among others. So, the Fed discussion document is just a formal summary of CBDC strengths and limitations vis-à-vis the Fed’s legal remit, offering up a natural delay and channel for public commentary. The author arrives at a similar conclusion to ours, which is that it would seem inevitable that some form of digital dollar will be issued, and it’s just a matter of when and how.

‘Still, the Fed seems committed to issue some kind of digital currency if it will protect the dollar’s status as the global reserve currency. Fed governor Lael Brainard has said the US needs to digitize the dollar to keep up with financial innovation in other countries—though she hasn’t provided any evidence on why those other countries’ CBDCs would make their currencies more attractive than the dollar. The Fed made a similar case in its new report…

That might not be enough reason for the US to launch a CBDC anytime soon. The dollar is seen as a safe haven asset because the US is good at fulfilling its financial obligations, not because it’s more innovative or easier to use than other currencies. If anything threatens the dollar’s status, it will be political or economic instability in the US, not any other CBDC or cryptocurrency…

Even bitcoin, the oldest digital asset, is valued in terms of the US dollar—despite its advocates’ aim to replace the official currency. At least for now, crypto needs the dollar more than the dollar needs the technological advantages that come with crypto.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

Tags: CBDCCentral Bank Digital CurrencyDigital CurrencyFederal ReserveThe Federal ReserveU.S. Digital DollarUnited States
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    instant payments, real-time payments, RTP

    Banks Developing Instant Payments Products in the U.S. Should Focus on Billers to Generate New Revenue Streams  

    May 31, 2023
    Digital Wallet Use Delivers on Convenience and Security

    Digital Wallet Use Delivers on Convenience and Security

    May 30, 2023
    5 Ways to Protect Your Financial Institution from a Cyberattack

    5 Ways to Protect Your Financial Institution from a Cyberattack

    May 26, 2023
    traditional banks

    How Traditional Banks Can Modernize Without Risk

    May 25, 2023
    identity fraud

    Javelin’s Identity Fraud Study Highlights the Changing Nature of Fraud

    May 24, 2023
    SASE, security-as-a-service

    Security-as-a-Service Secures
    Distributed IT Models

    May 23, 2023
    mule. real-time

    Early Detection of Mule Activity Requires Real-Time Solutions

    May 22, 2023
    embedded finance, ecommerce

    How Retailers Can Enter the World of Embedded Finance Confidently 

    May 19, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result

      Register to download this complimentary report from Brightwell: