Fed Governor: US CBDC Has ‘Promise’, but Retail ‘Difficult to Imagine’

Summary

• Federal Reserve Board governor Michelle Bowman discussed the potential for a United States central bank digital currency (CBDC) at Georgetown University.
• Bowman expressed doubt about the need for a CBDC to improve payment systems or enhance financial inclusion in the US.
• Bowman also cautioned against CBDCs being used as an implement of policy and highlighted possible privacy risks with its use.

Design and Policy Issues

Federal Reserve Board governor Michelle Bowman spoke at Georgetown University on April 18 to “offer a perspective” on central bank digital currency. The Fed plays an important role in the conversation about CBDC, Bowman said. Her examination of the problems a CBDC might solve and the design and policy issues it entails showed little enthusiasm.
Bowman expressed doubt about the need for a CBDC to improve the payment system or its ability to enhance financial inclusion in the United States. A CBDC would have to beat the performance of the new FedNow system to earn a place on the market, and the 4.5% of Americans who do not have bank accounts are unlikely to want to use a CBDC. Bowman added: “Unbanked households are also less likely to own mobile phones or have access to the internet, which would present barriers to CBDC adoption.”
Bowman also took a dim view of CBDC as an implement of policy. She saw the programmability of a CBDC as a “stark contrast to the flexibility and freedom embedded in physical currency or bank deposits” that could be misused. Furthermore: “There is also a risk that this type of control could lead to the politicization of the payments system and, at its heart, how money is used. A CBDC that permitted this type of control […] could also threaten the Federal Reserve’s independence.”

Cross-Border Payments & Stablecoin Alternatives

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