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Fed Admits CBDC is a ‘Long Way Off’ as This Digital Asset Gets Political

Published September 8, 2023 2:42 PM
Teuta Franjkovic
Published September 8, 2023 2:42 PM
Key Takeaways
  • According to Federal Reserve VP Michael Barr, the US have not yet decided whether to adopt CBDC.
  • Barr claimed that when it comes to CBDCs, the Fed is still in the “basic research” stage.
  • He had serious concerns about stablecoin issuance in the absence of robust federal control.

The Federal Reserve’s top regulatory official stated  on Friday that the central bank is “a long way” from making a decision about the issuance of its own digital currency and added that it would not do so without official approval from Washington.

Michael Barr, Vice Chair of the Fed for Supervision, mentioned that although central bank digital currency (CBDC) is under consideration, no decision has been reached. He emphasized that the Fed would only proceed with a CBDC if it had the “clear support” of the president and congressional legislation.

Barr said  the Fed is actively exploring advancements in payment tech and added that emerging technologies like blockchain, cryptocurrencies, and stablecoins are gaining traction, sparking interest and experimentation in both public and private sectors.

Fed’s Research Focuses on Architecture & Tokenization Models

Barr asserted that the Fed’s research on CBDCs focuses on system architecture and tokenization models.

“The Federal Reserve has made no decision on issuing a CBDC and would only proceed with the issuance of a CBDC with clear support from the executive branch and authorizing legislation from Congress, he stated .

He added that it’s crucial to note that research isn’t decision-making, and that Fed is far from deciding on CBDC issuance, which would require support from the executive branch and Congress.

Barr also highlighted that the Fed has implemented a supervision program for overseeing technology-related activities at banks, encompassing crypto-assets and stablecoins. In the case of stablecoins, it has issued guidance to Fed-supervised banks to ensure proper risk management and compliance.

However, he commented Fed is concerned about stablecoins without strong federal oversight because they could pose risks to financial stability, monetary policy, and the payments system.

Political Debate for the Upcoming Elections

Cryptocurrency has also become a contentious issue on Capitol Hill. In Congress, seven crypto-related measures are being debated.

Recently, Florida Governor Ron DeSantis called CBDCs:  a threat  to “personal economic freedom and security” that is tantamount to “government sanctioned surveillance.”

Together with Sen. Mike Lee, DeSantis has have firmly opposed a CBDC in order to uphold constitutional rights. Meanwhile, a bill to outlaw all CBDC pilot programs has been submitted by Representative Alex Mooney .

However, Congress is also discussing a distinct Republican CBDC proposal. Strangely, this one allows for a CBDC as long as a government-selected organization, such as Ripple or a Wall Street bank, manages it.

Contractors Do No Repairs

Due to the Bank Secrecy Act, a CBDC using a contractor must collect personal information and share it with authorities. The federal government would retain the power to monitor, restrict, and oversee spending.

DeSantis is a vocal opponent of the American digital currency. He signed a Florida law  outlawing the use of federal CBDCs as currency in may. Additionally, he forbade the use of foreign CBDCs, arguing that doing so would result in a “massive transfer of power from consumers to a central authority.”

And even though the U.S. Federal Reserve reportedly does not have any immediate intentions to introduce a digital dollar, this could change during the election of 2024, since more politicians are bringing up cryptocurrencies in their early debates.

Robert F. Kennedy, the Democrat running for president is a fervent proponent of cryptocurrencies, particularly Bitcoin, as an acceptable form of payment and investment in the US.

The fact that RFK apparently invested more than $250,000 in Bitcoin shows that he personally supports the crypto token movement and is not just using it as a campaign strategy.

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