National Policymakers Are Divided Over CBDCs
Sections of the U.S. and U.K. governments have weighed in on central bank digital currencies.
Key Takeaways
- The U.K. House of Lords Economic Affairs Committee has stated that it is opposed to a central bank digital currency.
- In the U.S., congressman Tom Emmer has also raised concerns over the implementation of a CBDC.
- The Federal Reserve's CBDC report is due imminently, and will likely dictate policy going forward.
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The debate over central bank digital currencies is heating up, with the U.K.’s House of Lords Economic Affairs Committee and U.S. congressman Tom Emmer recently weighing in on the subject.
Policymakers Discuss CBDCs
Politicians are getting to grips with CBDCs—but not everyone is in favor of one.
In the U.K., the House of Lords Economic Affairs Committee warned Thursday that introducing a central bank digital currency could pose significant risks to the U.K. economy. The committee asserted that witnesses who came before it could not make a “convincing case” for why the U.K needs a retail central bank digital currency.
The committee’s criticisms against the implementation of a CBDC included “state surveillance of spending choices, financial instability during periods of economic stress, an increase in central bank power without sufficient scrutiny, and the creation of a centralized point of failure.”
Over the pond, Republican congressman Tom Emmer expressed similar comments in a new bill. The representative from Minnesota’s legislation seeks to prohibit the Federal Reserve from issuing its own central bank digital currency directly to individuals, warning that doing so would lead the U.S. down “an insidious path” of “digital authoritarianism” akin to China.
Emmer’s main concern is that a CBDC would violate the public’s financial privacy. He stated that through a CBDC, the Fed could become empowered as a retail bank and track personal and financial information indefinitely. Although Emmer has raised concerns about the implementation of a CBDC, he does not appear to be against the concept of digital dollars if they were implemented in a way that is open to everyone, transactable on a transparent blockchain, and capable of maintaining user’s privacy.
These criticisms come as both the U.S. and U.K. governments ramp up plans for a future central bank digital currency. In November, the Bank of England entered a consultation phase on a potential CBDC, revealing that a launch between 2025 and 2030 is possible provided development is successful.
In the U.S., Federal Reserve chair Jerome Powell announced yesterday that its report on a potential CBDC is due imminently. The report outlining the Fed’s stance on digital dollars is long-awaited. Powell stated that investigating the possibility of a U.S. CBDC was a high priority last year. Whether the Fed’s report will favor the implementation of a CBDC remains to be seen; however, the report’s contents are likely to dictate policy surrounding digital assets going forward.
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