A U.S. central bank digital currency “is unlikely to be an equally effective tool for all of the purposes for which it has been advanced, or even to be effective for some stated purposes at all,” the Clearing House said in a paper published today. As policy conversations heat up around CBDCs, TCH emphasized that policymakers should “move cautiously with respect to evaluating and potentially introducing a U.S. CBDC.”
The paper outlined several principles that the U.S. should follow should it choose to create a CBDC. Among other things, TCH emphasized that there should be a strong legal foundation underlying the CBDC, and that care should be taken to ensure it does not threaten the health of the financial services ecosystem “by, for example, destabilizing existing domestic and foreign banking and payments ecosystems that are a large component of the financial system.”
Additionally, TCH noted that any potential CBDC legislation should require the development of detailed plans that address implementation needs of end users, financial intermediaries, and other third-party service providers prior to any significant expenditure by the government to implement U.S. CBDC.
The American Bankers Association has previously cautioned lawmakers that the introduction of a CBDC could fundamentally change the role of the central bank in the U.S. and reshape the banking system, and continues to urge lawmakers to proceed with caution.