Based on last week’s regulatory onslaught, it seems U.S. authorities do not like digital currencies. But a central bank digital currency (CBDC)? That has not been ruled out yet. At least, that's what one U.S. Treasury Department representative said at today’s Transform Payments USA 2023 conference,
Graham Steele, assistant secretary for financial institutions, spoke about the U.S. government’s FedNow payment service, central bank digital currencies (CBDCs) and the future of "open banking" at the industry event, organized by Reuters.
Steele, representing the Treasury Department, was clear in the fact that the United States “has not yet determined whether it will pursue a CBDC.” He did say, however, that the Treasury is leading an interagency working group to study a “potential” U.S. CBDC.
Central bank digital currencies are digital versions of fiat currencies. As of December 2022, roughly 114 countries, which represent 90% of global GDP, are researching how and whether they should launch a CBDC.
According to Steele, the working group wants to “strike the right balance” between global financial leadership, national security, privacy, illicit finance, and financial inclusion.
Central Banks Should Not Dominate CBDCs, Says an Ex-Central Banker
As central bankers all over the world consider issuing their own digital currency, coined CBDCs, a former member of the fold has argued that they should leave it up to the industry. Jón Helgi Egilsson, a former chairman of the Icelandic central bank's supervisory board, said at a conference on Wednesday that central bank digital currencies (CBDCs) need not be issued by the institutions themselves. "Where private companies compete in the market, in technical and business innovation, a CBDC or CBD...
He acknowledged that the risks of a retail CBDC, such as the danger of bank runs, which could be exacerbated by the ease and speed in which transactions can occur under such a system.
CBDCs have been critiqued by many for their perceived lack of privacy, as well as the fall in institutional trust over the years, showcased by a recent poll conducted by the Cato Institute showing only 16 percent of Americans support one. Steele addressed these concerns, tying them neatly with illicit activities, a common talking point among U.S. regulators and crypto-skeptics.
“It is important that we consider the extent to which privacy and anonymity might be preserved,” he said.
Steele added that the Treasury will be exploring Privacy Enhancing Technologies (PETs) while also “ensuring transparency and traceability, thus reinforcing the trust of users in digital financial transactions.”
Bitcoin, Ethereum, stablecoins, and other types of cryptocurrency were absent from Steele’s commentary.
Steel said that the digitization of financial services is coming fast, and that the treasury-led group will look to work with industry leaders and policy makers to cover any possible “shortcomings.”
Regardless of what is to come of the U.S. government’s approach to digital currencies, both private and public, it's clear officials are preparing for the approach itself.
