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Federal Reserve official says CBDC risks outweigh benefits  

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The U.S. Federal Reserve governor Michelle Bowman has expressed her concerns over the possible creation of a U.S. central bank digital currency (CBDC), arguing that the risks associated with CBDCs far outweigh their benefits. 

Bowman is not bullish on a U.S. CBDC 

Despite the growing interest in central bank digital currencies (CBDC), with about 32 nations already in the development stage, while 39 countries are currently conducting research on its concepts, mixed reactions still trail CBDCs globally.

In the latest development, the U.S. Federal Reserve gov., Michelle Bowman, said during a recent speech at Georgetown University that though a U.S. CBDC may have some use cases, including for international payments processing and settling certain financial market transactions, the possibility of its benefits outweighing its risks is quite slim.

Bowman stated that the design and policy issues surrounding CBDCs when it comes to consumer privacy and its possible adverse impacts on the banking system, make it impossible to justify its uses beyond just interbank and wholesale transactions.

A U.S. CBDC may not be necessary 

Bowman argues that though it’s crucial to examine the potential for a U.S. CBDC, the highly controversial digital currency may not be an all-in-one solution.

She noted while some CBDC proponents are of the opinion that it enables faster, frictionless, and cost-efficient payments, the FedNow payments solution being developed by the apex bank can also offer such benefits.

The 51-year-old Republican Party politician and attorney also made it clear that contrary to what its proponents claim, a U.S. CBDC will have a near-zero positive impact on financial inclusion, since at least one member of about 95% of U.S. households own a bank account and the remainder have no bank accounts simply because they are wary of banks.

In Febuary, Rep. Tom Emmer proposed a bill aimed at making it impossible for the Federal Reserve to issue a CBDC for retail uses. 

As it stands, the U.S. remains indecisive about launching its CBDC, and a new draft bill for stablecoin regulation published by the U.S. House Financial Services Committee, has also called for a feasibility study on the U.S. digital dollar and its impact.

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