Fed Governor Waller Adds Voice to Fed Leadership Opposed to CBDC

It’s Monday and the week starts off with “agreeing with Fed members for different reasons.” In a speech he gave Friday at Harvard University, Fed Governor Christopher Waller added his voice to those of Fed Chair Jerome Powell and Vice Chair Lael Brainard, who also oppose the creation of a US central bank digital currency (CBDC).

Needless to say, while this is welcome, our rationale greatly differs from Fed members.

“The factors supporting the primacy of the dollar are not technological, but include the ample supply and liquid market for U.S. Treasury securities and other debt and the long-standing stability of the U.S. economy and political system,” Waller said in prepared remarks delivered at Harvard University. “No other country is fully comparable with the United States on those fronts, and a CBDC would not change that.”

Waller elaborated that he is skeptical of arguments put forward by CBDC advocates that a digital dollar would address fraud, theft and money laundering or improve payments more than existing technologies.

“Meaningful efforts are underway at the international level to improve cross-border payments in many ways, with the vast majority of these improvements coming not from CBDCs but improvements to existing payment systems,” said Waller.

Discussions around a U.S. CBDC began in earnest after China started experimenting with a digital yuan. But the Fed governor cast doubt on a foreign CBDC supplanting the U.S. dollar’s global reserve currency status, an argument put forward in support of a digital dollar.

Even if a foreign CBDC takes off, Waller said, the effects of companies using it, “will likely only be on the margin because they rely on a large enough number of individuals and businesses being nearly indifferent between the dollar and the foreign currency in CBDC form.”

We and others have written extensively about the problems presented by a CBDC, ranging from increasing government control to the technological challenges. We’ll chalk this one up in the W column for now even if our reasons diverge from those of members of the Fed.