On Tuesday, Federal Reserve Governor Michelle Bowman delivered a speech about central bank digital currency (CBDC). The Governor is generally supportive of a wholesale digital dollar. However, she believes that the tradeoffs between benefits and unintended consequences of retail CBDCs make it hard to justify direct access beyond interbank uses.
In her speech, Ms. Bowman addressed two major questions: what problem could a CBDC solve, and what features should be considered in its design and adoption? The Governor touched on various policy objectives and discussed some of the unintended consequences of CBDCs.
The first shortcoming she observed was the promise to make payment systems more efficient. CBDCs present new opportunities to increase the speed of retail payments and reduce friction, but Governor. Bowman argues that their relative benefits depend on existing payment infrastructures. In the US, for example, the soon-to-launch FedNow service will allow customers to send and receive payments in real-time, so there would be little need for a CBDC.
Article continues …
Want the full story? Pro subscribers get complete articles, exclusive industry analysis, and early access to legislative updates that keep you ahead of the competition. Join the professionals who are choosing deeper insights over surface level news.
