Republicans Take a Less Supportive Position on CBDCs
Republican Party member Patrick McHenry talked of a number of considerations before Brainard’s testimony.
“No one has made a compelling case on why we should expand the Fed’s mandate into retail banking or how a Fed-issued CBDC won’t politicize the Fed.”
“There is potential for significant harm to our financial system if we move forward without sorting through potential consequences.”
McHenry questioned Brainard on what problem a CBDC would solve when considering payments are digital and the movement of cash between banks is digital.
Brainard highlighted three risks that included,
- Declining use of cash.
- Consumers no longer have access to a safe central bank-issued digital currency.
- Stablecoins become the dominant form of the US digital dollar, which could lead to Fragmentation of the payment system
- Instability of those digital currencies. The kind of instability that Congress tried to move away from 100 years ago.
The hearing highlighted that US lawmakers and the Fed are way off from a central bank digital currency.
CBDCs in Circulation Today
A number of central banks and monetary authorities have developed and issued CBDCs today. According to CBDC Tracker, The Bahamas was the first with the Sand Dollar. Nigeria is the only other nation to launch a CBDC with the e-Naira.
Countries currently in their CBDC pilot phase include South Africa, Russia, South Korea, China, Canada, and the UAE.
Fourteen nations are in the proof of concept phase, including Australia, Brazil, Japan, and New Zealand.
Denmark, Ecuador, Finland, Haiti, the Philippines, and Singapore are currently the only nations to have canceled plans to introduce CBDCs. The rest of the world, including the UK, the US, and the euro area, are currently in the research phase.
Both the UK and the US will likely continue to trail other nations, with lawmakers concerned with a number of issues, including cyber security.