Wall Street Bank Lobby Lines Up Against a US Digital DollarAdvisor Perspectives
Wall Street lenders are calling on the US government to hold off on launching a digital dollar, arguing that a virtual currency backed by the Federal Reserve risks draining hundreds of billions of dollars out of the banking system.
Q1 2022 hedge fund letters, conferences and more
An American central bank digital currency, or CBDC as it’s known, would act as a direct competitor to private bank deposits and make credit less available to businesses and households, according to the American Bankers Association and the Bank Policy Institute. The trade groups were responding to a Fed discussion paper released in January that laid out the potential benefits and risks of launching a new virtual tender.
“As we have evaluated the likely impacts of issuing a CBDC it has become clear that the purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute,” the ABA said in a May 20 letter to the Fed. “Based on this analysis, we do not see a compelling case for a CBDC in the United States today.”
The prospect of a Fed-backed CBDC has become a hot-button issue in Washington as crypto has grown to a more than $1 trillion market and so-called stablecoins have drawn concerns from regulators and lawmakers. In March, the White House said in an executive order on cryptocurrency policy that it was placing “highest urgency” on research and possible development of a US digital dollar.
While supporters say a Fed-backed digital currency would help ensure the dollar’s dominance as countries including China move forward with their own versions, the Wall Street trade groups say such a move could backfire.
Read the full article here by Allyson Versprille, Advisor Perspectives.