US Financial Reps Offer Differing Opinions on the Need for CBDCs

US Rep. Jim Himes discusses why the U.S. should consider moving forward with a central bank digital currency while a member of the Federal Reserve’s governor board said that CBDCs are unlikely to improve the dollar’s dominance.

US Rep. Jim Himes (D-Conn.) said that the US should focus on promoting the development of central bank digital currency (CBDC) pilots to remain competitive in the digital asset space. CBDC is seen as a new form of native digital currency, and pilot projects are taking shape in countries like Australia, Iran, Japan and even Russia.

Himes emphasized that the US should keep working on a CBDC to have the ability to move forward when the time comes. Another representative, Sims, added that CBDCs are a technological innovation and sees no reason why the US cannot keep up with its peers and competitors and see where it goes. 

Sims, who currently serves on the House Financial Services Committee’s subcommittee on national security, international development and monetary policy, said his support for the U.S. CBDC pilot was based on the idea that he didn’t want the U.S. to “lag behind.” ‘” adding that a CBDC may give markets that appeal to specific groups of people.

Currently, the US has “nowhere to go” when it comes to developing CBDC projects, Himes said. He added that “major political decisions” would need to be resolved among lawmakers before progress could be made.

Federal Reserve Governor Says US Doesn’t Need CBDCs

Federal Reserve Governor Christopher A. Waller insists the dollar can survive without a central bank digital currency (CBDC). Waller believes that any threat of foreign CBDCs would only threaten the dollar’s dominance as a medium of exchange, not as a store of value or unit of account.

Waller said it would be wrong to launch a digital dollar for fear foreign CBDCs would threaten the dollar’s supremacy. Many of the dollar’s advantages as the dominant global currency, he argues, can be attributed to the Bretton Woods system, not technology. With the exception of intra-European trade, most international companies invoice in US dollars and most foreign currency transactions involve US dollars. These factors, including the depth and liquidity of the US economy, allow the dollar “to affect the standards of the global monetary system,” he concluded.

Waller also said that the argument in favor of foreign companies using foreign CBDCs instead of US dollars only considers the technical advantages of CBDCs. Faster transaction times and lower transaction costs hide many of the reasons why the US dollar can be chosen. One reason is the massive liquidity in US government bonds and debt.

Waller also “suggests” that a CBDC could offer similar protections as the US dollar against fraud, money laundering and terrorist financing by reducing transaction friction.