CNBC Television published this video item, entitled “Fed vice chair expresses doubts on establishing digital U.S. dollar” – below is their description.
CNBC’s Kelly Evans reports on the Federal Reserve Vice Chair Randal Quarles’ thoughts on a digital dollar. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
With the Federal Reserve set to release a much-anticipated report this summer on the potential creation of a digital dollar, the central bank’s vice chair for supervision said Monday that he has significant doubts about the idea.
Fed Governor Randal Quarles expressed skepticism about most arguments made in favor of a central bank digital currency.
“The potential benefits of a Federal Reserve CBDC are unclear,” Quarles said in prepared remarks to the Utah Bankers Association. “Conversely, a Federal Reserve CBDC could pose significant and concrete risks.”
Among the downsides he cited are the challenges if the public could bypass traditional banks and go straight to the Fed for digital money. Along the same lines, he said the benefits that consumers get through bank competition might be diminished if the Fed stepped further into the space.
Also, he worried about the potential for cyberattacks on a system whose security would be difficult to design.
Proponents of a Fed-issued digital dollar say it could speed up payments systems, particularly internationally. They also cite the benefits for the unbanked or underbanked who don’t have access to the existing digital payments system.
Essentially, a Fed digital currency would act the same as the digital dollars that are exchanged every day, except instead of being guaranteed by banks they would be backed by the Fed. Those who don’t have bank accounts could use the Fed system to transfer money back and forth. Advocates say, for example, that getting stimulus checks out to people during crises like the Covid-19 pandemic would be made easier through a central bank digital currency system.
But Quarles said the system could be difficult and expensive to design, likely would require an act of Congress and would be redundant for the systems already in place.
“First, the U.S. dollar payment system is very good, and it is getting better. Second, the potential benefits of a Federal Reserve CBDC are unclear. Third, developing a CBDC could, I believe, pose considerable risks,” he said. “So, our work is cut out for us as we proceed to rigorously evaluate the case for developing a Federal Reserve CBDC.”
His remarks come with the Fed set to release a research paper this summer to explore the issue further. Some other Fed officials, such as Governor Lael Brainard, have expressed support for the CBDC.
In announcing the study, Fed Chairman Jerome Powell said in May that the “focus is on ensuring a safe and efficient payment system that provides broad benefits to American households and businesses while also embracing innovation.”
CBDC advocates worry that the Fed could lose its place in the global financial system if it doesn’t keep up in the space, with the hegemony of the U.S. dollar as the world’s reserve currency ultimately coming under threat.
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