BlockChain Association Head Understates Industry Concern Over CBDCs
There’s a lot to unpack here, but we’re hoping the characterization of a central bank digital currency (CBDC) being “sort of agnostic to mildly negative” is Blockchain Association Executive Director Kristin Smith being tactful.
As we wrote earlier this week, the more people learn about CBDCs and their authoritarian implications, the more they learn to hate them. Even those who are unfamiliar with crypto: half of ordinary Americans now say they are against it. And don’t believe a CBDC can be designed that in any way protects privacy.
Blockchain Association Executive Director Kristin Smith raised privacy concerns about a potential CBDC during a Brookings Institute forum on Thursday. Smith appeared alongside Treasury Department Undersecretary for Domestic Finance Nellie Liang and other financial policy experts at a virtual event focused on digital assets and the future of payment systems.
Conversations about a government-issued digital currency continue to heat up in Washington. The Federal Reserve is weighing issuing a CBDC, which would act as a national stablecoin, and the Biden administration released a series of digital asset reports last week that touched on the topic. Lawmakers on the House Financial Services Committee also recently drafted a new version of a stablecoin bill after months of negotiations, which includes a provision mandating that the Fed continue its study of the issue and report to Congress its thinking on a digital dollar.
"In my view, I do think we need legislation," around stablecoins, Liang said.
The design choices that go into a CBDC are “incredibly important” and depend on whether the currency is intended for retail or wholesale, Smith said. While Smith, whose association represents major crypto firms like Circle, Kraken and Grayscale, as well as investors like Union Square Ventures and SkyBridge Capital, had critiques for the Biden administration’s digital asset reports, she offered praise for its look at CBDCs.
“I appreciated that the reports acknowledge having democratic values and privacy as part of the CBDC,” Smith said. “Particularly at the retail level, the last thing we do is the government has a database of all the transactions. We don’t necessarily want them to be able to get in and follow every little single thing that every individual citizen is doing.”
Smith pointed to China, a country that is poised to launch its own digital currency, as a cautionary example for the United States.
“If we look at China's vision for a CBDC, that is largely a tool for surveillance on their citizens. We don’t want that here in the U.S.” Smith said.
Fed Vice Chair Lael Brainard says that a CBDC decision isn't imminent, and that one consideration will be whether issuing one could displace financial intermediaries like banks, credit unions, and other consumer financial companies, an outcome that might upset the entire financial system. For now the central bank is more focused on its longtime faster payments project, FedNow, which it hopes to roll out next year.