Fed Governor Michelle Bowman Says Creation Of US CBDC 'Could Pose Significant Risks'

Michelle Bowman, a member of the U.S. Federal Reserve Board, expressed reservations about the necessity and viability of a U.S. central bank digital currency (CBDC).

During a discussion at Harvard Law School on Tuesday, she said, "The potential benefits of a U.S. CBDC remain unclear, and the introduction of a U.S. CBDC could pose significant risks and tradeoffs for the financial system."

As the digital currency landscape continues to evolve, conversations like these are central to events such as Benzinga's Future of Digital Assets conference on Nov. 14.

The Federal Reserve, responsible for exploring the potential of a digital U.S. dollar, has made it clear that any decision in this direction would require both the White House's nod and Congressional approval.

There's been resistance on this front, with some Republican legislators advocating against the government venturing into the CBDC domain.

Bowman, who is among the seven members governing U.S. banking and payment systems, said, "I have yet to see a compelling argument that a U.S. CBDC could solve any of these problems more effectively or efficiently than alternatives, or with fewer downside risks for consumers and for the economy."

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She highlighted the recent introduction of FedNow, an instantaneous payment settlement service, and noted the support of private financial institutions for a similar solution, offering consumers swift monetary transactions. Bowman posited that alternative solutions might tackle issues targeted by CBDCs, but in a more adept manner.

Shifting her attention to private stablecoins, essential components of the cryptocurrency market, Bowman voiced concerns.

"Stablecoins purport to have convertibility one-for-one with the dollar, but in practice have been less secure, less stable, and less regulated than traditional forms of money," she said.

Bowman proposed that the Federal Reserve should consider implementing banking regulations on stablecoin issuers to ensure a secure financial ecosystem.

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