During a recent speech at Georgetown University, Federal Reserve Board Governor Michelle W. Bowman expressed skepticism over her agency adopting a central bank digital currency (CBDC) anytime soon.
Bowman said improving the speed of payments, often a touted benefit of a CBDC, can be administered without establishing a Fedcoin. She pointed specifically to the forthcoming launch of their FedNow Service as an option—though the program could give rise to one by nationalizing payments.
She also stressed that a CBDC can’t be created without approval from Congress, where a divided chamber is unlikely to agree to an overhaul of banking.
Bowman further cautioned against the proposal for having the potential to politicize the “payments system” and, in turn, give the government authority to restrict “certain types of private spending or limit access to banking accounts” while also encroaching on the Federal Reserve’s independence. Many Americans have rightfully voiced concerns about a centralized authority having more insight and potential control of personal banking transactions through a CBDC. They’ve seen how the Canadian Government’s willingness to freeze the accounts of truckers pushing back against vaccine mandates, and how the Chinese Communist Party uses its CBDC to enhance its social credit system.
She criticized stable coins like Bitcoin, but was short of endorsing a U.S. CBDC. Mainly, she worries it would cannibalize—not complement—the U.S. banking system, thus disrupting an already fragile system.
A CBDC is digitized fiat money that already exists and is tied to the central banking system. Opponents of cryptocurrency prefer a centralized digital coin because it’s easier to control and access individual accounts.
As I’ve noted here at IWF, the Biden administration wants to explore a CBDC option despite it being a preferred currency of the Chinese Communist Party (CCP):
The Biden administration also expressed interest in creating a U.S. Central Bank Digital Currency (CBDC) “that is interoperable with CBDCs issued by other monetary authorities [and] could facilitate faster and lower-cost cross-border payments and potentially boost economic growth, support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance.”
In contrast with Bitcoin and Ethereum, which are decentralized, CBDCs are centralized and the preferred currency of governments—including the CCP.
While many countries are experimenting with these systems, few have gone on to successfully implement them. Only 11 nations have launched CBDCs. In contrast, 15 programs are inactive while two have canceled them altogether.
To learn more about CBDCs, go here.