It seems improbable that the benefits of a central bank digital currency (CBDC) would outweigh the hazards.
So stated Federal Reserve Governor Michelle W. Bowman at a lecture at Georgetown University on Tuesday (April 18).
“From my perspective, wholesale CBDCs may hold some promise in the future for the settlement of certain financial market transactions and the processing of international payments,” Bowman said.
“When it comes to some of the broader design and policy issues, particularly those around consumer privacy and impacts on the banking system, it’s difficult to imagine a world where the trade-offs between benefits and unintended consequences could justify a direct access CBDC for uses beyond interbank and wholesale transactions,” Bowman added.
Noting that it is still critical to research the possibilities for a CBDC in the United States, Bowman stated that there are certain circumstances where a CBDC is unlikely to be the best answer to a problem.
For example, although some look to CBDCs to make payments quicker while lowering cost and friction, Bowman believes that these aims may be met with the imminent introduction of the Federal Reserve’s FedNow Service.
Others suggest that a CBDC in the United States may promote financial inclusion, however according to Bowman, 95% of U.S. families have at least one person with a bank account, and the remaining is unbanked because they don’t want a bank account or don’t trust banks.