Fed’s Bowman Speech Questions About ‘Sensible’ Regulatory Framework For Digital Assets

Federal Reserve Governor Michelle Bowman has expressed uncertainty today about whether a U.S. central bank digital currency (CBDC) is necessary or advisable.
Fed’s Bowman Speech Questions about ‘sensible’ regulatory framework for digital assets
Fed’s Bowman Speech Questions about ‘sensible’ regulatory framework for digital assets

Federal Reserve Governor Bowman has expressed uncertainty today about whether a U.S. central bank digital currency is necessary or advisable.

In remarks made at a Harvard Law School event, Bowman stated that while the risks associated with a digital dollar are potentially very high, its potential benefits are still unknown.

Her comments come as the Fed researches CBDC technology to inform policymaking. Congress would need to approve any move to actually create a digital money.

“I have yet to see a convincing argument that a CBDC in the United States could tackle any of these problems more effectively or efficiently than alternatives, or with fewer negative consequences for consumers and the economy.”– Bowman stated.

A CBDC, proponents argue, could modernize payments, increase financial inclusion, and provide access to “safe” central bank money.

However, Bowman believes that existing and upcoming payment systems in the United States may meet those needs without the drawbacks of a CBDC. She mentioned the new FedNow instant payments network, which will go live in 2023.

Her skepticism is shared by Fed Chair Jerome Powell, who has stated that there is no reason to rush into a digital currency unless there is strong justification.

Bowman warned that a lack of anonymity with CBDCs, as well as bank disintermediation, pose consumer risks. A digital dollar could also jeopardize the Federal Reserve’s control over monetary policy and the financial system.

She argued that privately issued stablecoins may be a greater concern than the current lack of a CBDC. Bowman advocated for more stringent bank-style regulation of stablecoin issuers.

“Stablecoins purport to have convertibility one-for-one with the dollar, but in practice have been less secure, less stable, and less regulated than traditional forms of money,” she said.

Republican lawmakers have also introduced legislation that would prevent the Fed from ever launching a CBDC.

While the Fed is keeping its options open, Bowman’s comments show that there is still significant skepticism within the central bank about the benefits of digital currency versus the status quo.

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