Fed’s Bowman: CBDC benefits remain unclear

Federal Reserve Governor Michelle Bowman said she has yet to see a compelling argument that a U.S. central bank digital currency could address payments system problems more effectively, efficiently, or with fewer risks than alternatives.

Risks Outweigh Benefits: Speaking in Washington, Bowman said that while the benefits of a retail CBDC remain unclear, responsible innovations like the FedNow Service are speeding up payments. Given potential risks to the banking system and financial stability, policymakers should continue researching CBDCs while considering whether a CBDC could be designed in a way that preserves the U.S. intermediated banking model, she said.

Wholesale CBDC: Bowman also expressed skepticism of a hypothetical wholesale CBDC, which would function between banks. She noted that bank reserves already serve as a digital form of central bank money and said policymakers should ask what problem a wholesale CBDC would solve.

ICBA View: ICBA opposes the creation of a U.S. CBDC and recently told Congress a wholesale CBDC is similarly unnecessary given the increasing adoption of instant payment solutions. ICBA recently commended the House Financial Services Committee for passing legislation to restrict the Federal Reserve from issuing a CBDC.