Fed Governor: CBDC Not Crucial to Supremacy of Dollar

The creation of a central bank digital currency (CBDC) in America is probably not that crucial to ensuring the supremacy of the U.S. dollar, Federal Reserve Governor Christopher Waller said in a speech Friday (Oct. 14).

Waller made these comments at an event sponsored by the Harvard National Security Journal, saying that a U.S.-backed digital dollar would not provide material benefits over making dollar-denominated payments.

Waller said this is especially true because launching a CBDC, would pose new risks, such as cybersecurity threats.

“I don’t think there are implications here for the role of the United States in the global economy and financial system,” he said, suggesting that the debate surrounding a proposed digital dollar should instead focus on financial stability and inclusion and, payment system innovations.

Earlier this month, another Fed official — Cleveland Federal Reserve President Loretta Mester — said in a speech that even if the U.S. does not issue CBDC, the central bank’s study of the technology will pay dividends.

Addressing the 2022 Chicago Payments Symposium on Oct. 4, Mester said that “given the evolving digitalization of the financial system,” the Fed’s research into the technologies of a digital dollar will yield “insights that will not only help inform a future decision on a CBDC but also aid our current work on faster payments, interoperability between payment systems, and payment system resiliency.”

Read more: Study of Digital Dollar Beneficial Even if CBDCs Never Happen

Among the primary questions the Fed is trying to answer is how to ensure the security of a digital currency and how to balance privacy and transparency, said Mester.

She also noted that the safeguards needed to “maintain the public’s confidence in the payment system will also need to evolve,” with public- and private-sector service providers working with regulators to protect against cybersecurity breaches, fraud and data leakage.

While many in the crypto sector say quantum computing is decades off — which could represent such a leap forward in computing power that the cryptography behind cryptocurrencies could fail — Mester cautioned that it will also “disrupt the cryptography currently in place that secures our payment services.”