Last month, Republican Congressman Alex Mooney introduced the “Digital Dollar Pilot Prevention Act” to stop the Federal Reserve from “establishing, carrying out, or approving a program intended to test the practicability” of a central bank digital currency (CBDC). The bill has already received some support from House Republicans and conservative advocacy groups, and this week, it was also endorsed by the National Association of Federally-Insured Credit Unions (NAFCU), a trade organization representing more than 180 members.
NAFCU is an industry trade group that advocates for all federally-insured not-for-profit credit unions. A recent letter noted that the organization “is concerned that the costly trade-offs are very likely to exceed hypothesized benefits of a CBDC,” presumably referring to the impact of a digital dollar on the banking and credit union sectors.
Many banks fear that if the Fed introduces a retail CBDC, they will face increased competition for deposits from an institution that also regulates them. This could increase the risks of crowding out banks and facilitate future runs because switching to a government-backed CBDC will be easy.
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