During an address at an industry event today, Federal Reserve Governor Christopher Waller reiterated that he is “highly skeptical” that there is a compelling need for the Fed to create a central bank digital currency and cautioned against following international moves to do so. The focus, Waller posited, should be on CBDC-related topics, such as effects on financial stability, payment system improvements and financial inclusion.
“A U.S. CBDC is unlikely to dramatically reshape the liquidity or depth of U.S. capital markets,” Waller said. “It is unlikely to affect the openness of the U.S. economy, reconfigure trust in U.S. institutions or deepen America’s commitment to the rule of law.” A U.S. CBDC would come with “a number of costs and risks,” he added, including cyber risk and the threat of disintermediating commercial banks, “both of which could harm, rather than help,” the dollar’s international standing.
Waller said international efforts to improve cross-border payments don’t come from CBDCs but from improvements to existing payment systems. “The factors supporting the primacy of the dollar are not technological but include the ample supply and liquid market for U.S. Treasury securities and other debt and the long-standing stability of the U.S. economy and political system,” he said. For non-U.S. companies already conducting business in dollars, a U.S. CBDC would not create benefits “over and above the current reasons for making U.S. dollar-denominated payments.” In addition, Waller said, making a U.S. CBDC globally available would raise money laundering issues and international financial stability concerns.
Stablecoins, he said, may be “more attractive” than existing options for payments due to their ability to provide real-time, lower-cost payments between countries previously poorly served and for those with “weak economic fundamentals.” This is different than an intermediated U.S. central currency, for which access in developing economies would depend on banks’ incentives to provide access, he explained, while stablecoins may be held anywhere that allows its citizens to do so. Stablecoins, however, still must be risk managed and subject to a “robust supervisory and regulatory framework,” Waller cautioned.
