Federal Reserve Gov. Christopher Waller is unconvinced that a U.S. central bank digital currency is needed to maintain the dollar’s preeminence in the global economy.
Speaking Oct. 26 at an economics conference in Washington, D.C., Waller said he hasn’t heard a convincing explanation yet of the problem a CBDC will solve.
“The Fed’s job is to make sure the payments system functions effectively,” Waller said. “For over 100 years that has meant that the commercial banks and credit unions engage directly with the consumers, while we sit in the back and make sure things clear and settle efficiently. What then are the reasons that support why we should change our role to sitting out front and engaging directly with the consumers? I haven’t heard a good answer to that.”
Waller said in an Oct. 14 speech that a U.S.-issued CBDC could harm the dollar’s standing by potentially disintermediating commercial banks while introducing money laundering and international financial stability concerns. To him, the strength of the dollar revolves around the size and openness of the U.S. economy and international trust in the U.S. rule of law and institutions.
“Meaningful efforts are underway at the international level to improve cross-border payments in many ways, with the vast majority of these improvements coming not from CBDCs but improvements to existing payment systems,” Waller added.
In January 2022, the Federal Reserve Board published a discussion paper on CBDCs, including potential benefits and risks. The board has not decided whether to move forward with a CBDC and doesn’t plan to issue one “without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
Support for a CBDC remains split among party lines. House Financial Services Committee Chair Maxine Waters (D-Calif.) said a digital dollar would ensure the benefits from the dollar’s global role will remain even as other countries, including China, introduce their own CBDCs.
In February, House Majority Whip Tom Emmer (R-Minn.) introduced a bill that would ban the Federal Reserve from directly issuing a CBDC. The bill would also require the Federal Reserve Board to consult each Federal Reserve bank about the development of a CBDC study or pilot program and issue a quarterly report to Congress on their findings. Emmer’s bill passed out of the House Financial Services Committee in September and has been introduced to the House floor.