Fed’s Waller says he is skeptical a central bank digital currency would improve U.S. payments

By Jonnelle Marte

(Reuters) -U.S. Federal Reserve Governor Christopher Waller said on Thursday that many of the financial challenges that could be tackled by a central bank digital currency are already being addressed by other policies and he is skeptical the approach would improve the U.S. payments system.

In a detailed speech that rebutted many of the reasons provided by supporters of a central bank digital currency, or a CBDC, Waller pointed to private sector innovation and other policies that he said might do a better job when it comes to speeding up payments or lowering banking costs.

«I remain skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system,» Waller said in remarks prepared for a virtual event organized by the American Enterprise Institute.

Waller also said he thought the government should not intervene in the economy unless there is a clear «market failure» that needs to be addressed, adding that a CBDC could disintermediate commercial banks and disrupt a financial system that works well.

A Fed CBDC could become a target for cybersecurity threats, Waller cautioned. And the Fed would likely not be able to create CBDC accounts that could be used by the general public without congressional authorization, Waller said.

The discussion over the pros and cons of a CBDC is heating up as a growing number of countries research or develop their own digital currencies. The Fed will release a discussion paper this summer assessing how a CBDC could affect the payments system and the Boston Fed is working with the Massachusetts Institute of Technology to research the technology that could be used.


Fed officials are divided on the benefits and costs of creating a U.S. CBDC. Some policymakers such as Waller and Fed Governor Randal Quarles say they are skeptical. Meanwhile, Fed Governor Lael Brainard said last week that the United States is at risk of falling behind at a time when China and other major countries are moving forward with their own digital currencies.

«If you have the other major jurisdictions in the world with a digital currency, a CBDC offering, and the U.S. doesn’t have one, I just, I can’t wrap my head around that,» Brainard said.


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