Federal Reserve Governor Michelle Bowman has expressed uncertainty today about whether a U.S. central bank digital currency (CBDC) is necessary or advisable.
In remarks at a Harvard Law School event, Bowman said the potential benefits of a digital dollar remain unclear while posing possibly significant risks.
Her comments come as the Fed researches CBDC technology to inform policymaking. But any decision to actually issue a digital currency would require congressional authorization.
“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 the economy,” Bowman stated.
Proponents argue a CBDC could modernize payments, boost financial inclusion, and provide access to “safe” central bank money.
But Bowman contends existing and upcoming U.S. payment systems may address those needs without a CBDC’s drawbacks. She pointed to the new FedNow instant payments network launching in 2023.
Her skepticism aligns with Fed Chair Jerome Powell, who has said he sees no need to rush into a digital currency without strong justification.
Bowman warned that a lack of anonymity with CBDCs and the disintermediation of banks pose consumer risks. A digital dollar could also undermine Fed control over monetary policy and the financial system.
She argued that privately-issued stablecoins may be an even greater concern than the lack of a CBDC right now. Bowman advocated imposing stricter bank-like regulation on stablecoin issuers.
“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 noted.
Republican lawmakers have also introduced legislation to prohibit the Fed from launching a CBDC altogether.
While the Fed is keeping its options open, Bowman’s remarks indicate there is still significant doubt within the central bank around the merits of a digital currency versus the status quo.