Congressional Subcommittee Hears Testimony about Promises and Perils of CBDCs

Domestic examples still dominate CBDC use cases, but the international potential is growing.

Subcommittee Meets 

The Subcommittee on National Security, International Development and Monetary Policy held a hearing on the potential need for a change in monetary policy to reflect the growing influence of stable coins and central bank digital currencies (CBDCs). 

The subcommittee hosted a panel of industry leaders and academics who all stressed the urgency of action from the federal government. The hearing began at 10:00 in Washington on Tuesday, July 27, 2021. 

“This is not a question of the US and Europe versus China; it is a global issue. Our database features eighty-one countries—more than double the number we identified as active in exploring CBDCs one year ago,” testified Julia Friedlander, Senior Fellow and Deputy Director of the Atlantic Council. “But of the four historically most influential central banks in the world, (the US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England), the United States is furthest behind in its work on digital currencies.”

Topics included the global primacy of the dollar, the ramifications of digital currencies on cybersecurity and international sanctions, and the inherent infrastructure challenges in updating the financial technology sector.

Stunted Growth

It appears that inaction from the federal government could inhibit the growth and continuation of US financial hegemony of the world. At the time, most use cases worldwide continue to be for domestic reasons, however international trading and cross-border use examples are beginning to pop up.

It is inexcusable for the United States to come empty-handed when speaking internationally about this subject. As the global reserve currency, it is imperative to take a step forward and embrace advances in financial technology. 

Domestic Examples Must Come First

As a Congressional subcommittee, it would be remiss not to talk about the influence on small businesses and families. The panel agreed in unison that the US must establish and fortify a digital currency at home before moving into international transactions. The Congressional members also seemed to agree but were wary of privacy issues. 

Dr. Andrew Levin, Professor of Economics, Dartmouth College cited specific examples in New England where small businesses benefited from seamless and decentralized financial transactions. CBDCs are practical and feasible to adopt, he explained, and increasingly to the benefit of small businesses and families with the reductions of bank fees which routinely take fees up to 5%.

“It’s not surprising that small business owners are uniformly enthusiastic about the prospect of using digital dollars,” Levin explained. “It would be secure, convenient, and costless for both the payer and the payee.”

Embracing the World of the Future

The United States certainly must pivot toward the digital world. The panel emphasized the inherent leadership role assumed by the US because of its historical power.

The dollar must be able to survive the digital age. In contrast to the words of Federal Reserve Chairman Jerome Powell, US institutions need to find the capacity to get this issue right and fast. 

This is not an either-or situation. The United States will need a digital dollar to engage both domestically and internationally. The United States must galvanize the world and become a vanguard, and at a minimum lead with its private sector capacity with stablecoins. 

The reserve currency must have a digital equal to maintain status. “If there is no digital dollar on the cross-border platform then [everything] will change. It’s probably not ten years or five years away. I would guess maybe two years away. But that means the Federal Reserve has to catch up,” Levin warned the subcommittee.

Source : bsc.news