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The Federal Reserveās vice chairman of supervision and the chair of the Financial Stability Board (FSB), Randal K. Quarles, doubts the benefits of the digital dollar but says it ācould pose significant and concrete risksā to the U.S. banking system.
Fed Vice Chair Speptical About Digital Dollar
Federal Reserve Vice Chair of Supervision Randal Quarles talked about bitcoin and the Fedās work on a central bank digital currency (CBDC), the digital dollar, in a speech at the Utah Bankers Association Monday. Quarles is also the chairman of the Financial Stability Board (FSB). He said:
The potential benefits of a Federal Reserve CBDC are unclear. Conversely, a Federal Reserve CBDC could pose significant and concrete risks.
He then outlined the risks. āFirst, a Federal Reserve CBDC could create considerable challenges for the structure of our banking system ā¦ An arrangement where the Federal Reserve replaces commercial banks as the dominant provider of money to the general public could constrict the availability of credit, fundamentally alter the economy, and expose the public to a host of unanticipated, and undesirable, consequences.ā
Quarles further added that āa dominant CBDC could undermine the consumer and other economic benefits that accrue when commercial banks compete to attract customersā and āA Federal Reserve CBDC could also present an appealing target for cyberattacks and other security threats.ā
Quarles doesnāt believe there is any real threat against the U.S. dollar. Talking about threats, he said, āGold will always glitter, but novelty, by definition, fades.ā Noting that he sees little threat from cryptocurrencies like bitcoin, the Federal Reserveās vice chairman of supervision described:
Bitcoin and its ilk will, accordingly, almost certainly remain a risky and speculative investment rather than a revolutionary means of payment, and they are therefore highly unlikely to affect the role of the U.S. dollar or require a response with a CBDC.
In conclusion, Quarles said āthe U.S. dollar payment system is very good, and it is getting better,ā emphasizing that āthe potential benefits of a Federal Reserve CBDC are unclearā and ādeveloping a CBDC could, I believe, pose considerable risks.ā
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