Some members of Congress have been vocal about their opposition to the notion of a CBDC. The House Financial Services Committee advanced a bill last September that would block the creation of a central bank digital currency. And a group of Republican senators proposed a bill this year that would do the same, suggesting that a CBDC would infringe on citizens’ privacy. Despite political opposition to a potential U.S. central bank digital currency, research staff at the central bank continue to study the possibility.
OpenCBDC is a core processing engine for money that focuses on security, performance, scalability, and flexibility. It provides a codebase that supports 1.84 million transactions per second and settlement – meaning the transaction is completed – of under one second. The Boston Fed’s work on CBDC with MIT’s Digital Currency Initiative is known as Project Hamilton.
One could imagine a digital U.S. dollar, a digital euro, or a digital pound. Beyond this baseline definition though, “what is a CBDC” defies a simple definition. A CBDC built on distributed ledger technology offers a wide range of design and potential use options, as well as potential risks. This variability complicates any discussion of a CBDC simply because we may not be talking about the same thing. Officials at the Fed have been studying the potential for a government-issued digital currency, and Fed chair Jerome Powell himself has repeatedly vouched for the exploration.
These effects will likely only be on the margin because they rely on a large enough number of individuals and businesses being nearly indifferent between the dollar and the foreign currency in CBDC form. A CBDC is a digital currency that is issued by a government and is normally a tokenized form of the country’s fiat currency. With the White House recommending the creation of a digital dollar, a major announcement could come as early as next year. At the same time, regulators around the world are looking at the regulation of cryptocurrencies.
An intermediated system, in which private intermediaries, including banks, would offer accounts or digital wallets to facilitate the management of CBDC, would leverage the private sector’s existing identity frameworks and service provision to consumers while mitigating the risk of disintermediation. While the investigation of CBDC raises many policy questions, for the purposes of today’s discussion I will focus on a few key areas that are important from my perspective. CBDC for Implementation of Policy ObjectivesAnother issue is whether the government should use new technologies, including a potential CBDC, to accomplish a variety of policy objectives beyond those directly related to the operating of an efficient and safe financial system. Imagine a scenario in which fiscal spending, in the form of government benefits or payments, could be transferred via CBDC and could include a limited timeframe in which they could be spent before expiring.
If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. What Brad Garlinghouse of Ripple Labs called “Gensler’s reign of terror” ended with Securities and Exchange Commission (SEC) Chair Gary Gensler’s resignation upon President Donald Trump’s inauguration. Paul Atkins, who has co-chaired the Token Alliance, spoke of the need for a “change of course” at the SEC and will be given charge of the SEC when he is confirmed as its new Chairman. Trump’s order, which said CBDCs “threaten the stability of the financial system, individual privacy, and the sovereignty of the United States,” prohibits the establishing, issuing or circulating a CBDC in the United States. During his presidential campaign, Trump heavily courted the crypto community, which eventually became his largest donor group. “The Federal Reserve (Fed) continues to pilot CBDCs but has not committed to a CBDC and will not issue one without executive branch and Congressional support,” analysts led by Alkesh Shah wrote.
The Federal Reserve’s goals for a CBDC take households, businesses, entrepreneurs, and consumers into account by offering more uses and efficiency than fiat or other supplementary monetary options. Paul Atkins has been nominated to chair the Securities and Exchange Commission. Atkins, a former SEC commissioner, is known for advocating market-friendly policies and opposing heavy-handed regulation. If confirmed, he will succeed Gary Gensler, whose aggressive enforcement of crypto regulations made him a divisive figure in the industry. Since his victory in November, Trump has focused on appointing government leaders who support the cryptocurrency sector.
