A United States central bank digital currency (CBDC) would not enhance the qualities of the U.S. fiat dollar that foreign companies value most, member of the U.S. Federal Reserve Board of Governors Christopher Waller said in a speech released on Oct. 14. CBDC skeptic Waller took a look at the question through the lens of national security at a symposium held at Harvard University. Waller had a more favorable view of a dollar-backed stablecoin.
The role of the U.S. dollar worldwide is an area where economics, CBDCs and national security dovetail, Waller said. The indisputable primacy of the U.S. dollar in the world brings benefits to the United States and other countries where the dollar plays a role in the local economy or as a reserve currency.
This primacy is not due to technological factors, and so the introduction of a U.S. CBDC would not impact the reasons for that primacy, Waller argued. He expressed doubt that “the purported shifting payments landscape as a result of the growth of digital assets, particularly CBDCs” is a threat to the U.S. dollar’s status in the world in terms of making settlements or storing value, although foreign CBDCs might make gains against the dollar as a medium of transaction.
On the home front, according to Waller:
“A U.S. CBDC is unlikely to dramatically reshape the liquidity or depth of U.S. capital markets. It is unlikely to affect the openness of the U.S. economy, reconfigure trust in U.S. institutions, or deepen America's commitment to the rule of law.”
This contrasts with the role of stablecoins, in Waller’s view. He dismissed suggestions that stablecoins could threaten the effectiveness of economic policy with the simple statement, “I don’t believe that to be the case.” Noting that “nearly all major stablecoins” are dollar-denominated, Waller concluded, “U.S. monetary policy should affect the decision to hold stablecoins similar to the decision to hold [U.S.] currency.” Presumably, this would extend U.S. economic influence.
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Waller included sizable doses of both scholarship and opinion in his argument. He stated, “The factors driving the dollar's role as a reserve currency are well researched and well demonstrated,” for example. Other elements of his argument were self-produced. “I am highly skeptical that a CBDC on its own could sufficiently reduce the traditional payment frictions” and “I am unsure whether even a large issuance of a stablecoin could have anything more than a marginal effect” on the role of the U.S. dollar, he said.
Waller also said, “I remain open to the arguments advanced by others in this space.” He has stated his positions on CBDCs and stablecoins in the past and advanced other arguments against a U.S. CBDC.