The Federal Reserve Board is actively researching the development of a central bank digital currency (CBDC) or related technologies, according to Vice Chair Michael Barr. During the Economics of Payments XII Conference, Barr discussed the Fed’s current focus on “end-to-end system architecture,” including ledgers and tokenization, as well as custody models for an intermediated CBDC. Barr reiterated that a digital dollar cannot be implemented without a congressional mandate, but emphasized the importance of learning from both domestic and international experimentation to support responsible innovation.
While Barr’s statements may seem uncontroversial, they bring to mind the skepticism expressed by Representative Tom Emmer, who called for an end to the Fed’s “sketchy” CBDC research during a House of Representatives session in September. Emmer’s concerns highlight the ongoing debate surrounding the potential implementation of a CBDC and the need for clear guidance and regulation.
Meanwhile, Sir Jon Cunliffe, the outgoing deputy governor of the Bank of England (BOE), also spoke at the conference, stressing that no decision has been made on a CBDC in the UK. However, Cunliffe referred to a consultation paper published in February that concluded that the current trends and technological advances in payments made it probable that a Digital Pound would be required by the end of the decade. The paper received significant public response, with 50,000 comments. Privacy, programmability, and concerns about the decline of cash were among the top issues raised by respondents.
Cunliffe added a note of humor, stating, “I would observe, if only a little tongue in cheek, that criticisms of the Digital Pound have ranged from concerns that it would disintermediate the banking system and threaten financial stability, to, at the same time, concerns that there would be no use for it and it would be a ‘solution looking for a problem.'” This highlights the diversity of opinions and concerns surrounding the potential introduction of a CBDC in the UK.
Cunliffe also envisioned a future where private companies could integrate and program the Digital Pound as a settlement asset into the services offered to wallet holders. He announced that the BOE would be issuing a discussion paper on stablecoin regulation in the coming months, indicating a continued focus on the evolving landscape of digital currencies.
Both Barr and Cunliffe emphasized the need for regulation in the stablecoin market. Barr stated that such assets “borrow the trust of the central bank,” thereby necessitating proper oversight. This underscores the importance of establishing a regulatory framework that ensures stability and consumer protection within the growing ecosystem of stablecoins.
In conclusion, the Federal Reserve’s research into CBDC technologies and the Bank of England’s exploration of a Digital Pound reflect the ongoing global interest in central bank digital currencies. While there are different perspectives and concerns surrounding the implementation of CBDCs and stablecoins, the consensus remains on the need for responsible innovation and regulation to ensure the integrity and trustworthiness of digital currencies.