'Central bank digital currency': Is Sen. Warren right to suggest for US?

Jessica Rinaldi / Globe Staff

Fact Box

  • Central bank digital currencies (CBDC) are “digital tokens” issued by a bank that are valued at the same amount of a country’s currency. Because they are supported by the government and controlled by a central bank, they would ideally provide businesses with stability in comparison with fluctuating cryptocurrencies. 
  • On March 31, 2022, Senator Elizabeth Warren told NBC’s Chuck Todd on “Meet the Press Reports” that it is time for the US to “do a central bank digital currency” in response to being questioned about improving the “digital world.”
  • On March 9, 2022, President Biden authorized the development of digital assets, specifically noting the “highest urgency on research and development efforts” into the possibilities of a US CBDC to boost the economy. 
  • According to the Atlantic Council, nine countries have launched CBDC, while 87 countries are currently evaluating the potential of digital currencies.

Siam (Yes)

Today, physical currency is still widely accepted, but many nations, including the US, have noted that people use cash less each year. And with the evolution of cryptocurrency, many governments are interested in implementing digital currencies and a cashless society.  

Many people don't have regular access to banking services in many countries, including the US. At least 5% of Americans don't have a bank account, and close to 14% use other expensive financial services like money orders, payday loans, Western Union, etc.

With the government backing of a central bank digital currency (CBDC), consumers would experience the convenience, transferability, portability, privacy, and easy accessibility that only digital transactions can provide. Further, enacting CBDC would also diminish the need for a complex banking system, lower cross-border transaction costs, and provide low-cost options for those who regularly transfer money abroad. More importantly, it could limit money laundering and tax evasion.

One of the most notable benefits of CBDC would be the implementation of monetary policies to control growth, provide stability and modulate inflation. Finally, using central bank digital currencies would also decrease the risks associated with cryptocurrency use--chief among them, fluctuating values and theft.

The International Monetary Fund recently issued a report revealing that CBDC could facilitate a seamless flow of money across geographical borders, lower maintenance costs, provide safer and faster access to money via digital channels, and promote financial inclusion of all citizens.

Finally, President Biden has already ordered the development of central bank digital currency, further reinforcing the importance of this much-needed innovation. 

Noah (No)

Senator Elizabeth Warren is wrong to suggest centralized digital currency. While everyone has the right to change their opinion, Senator Warren has been so vehemently against digital currency--specifically cryptocurrency--that this about-turn is clearly about more than just consumer fraud or 'Russian oligarchs.' 

It's important to distinguish that centralized digital currency is NOT cryptocurrency and defeats its fundamental purpose. At its core, cryptocurrency is decentralized to be free from monetary policy and political influence. Having a centralized digital currency diverges from the inherent value of crypto and returns the power over monetary policy from the people and back to the government. 

More government control of banking has only hurt the financial system. The Federal Reserve has a knowledge problem, as discerning the proper monetary action and executing it effectively in the moment has proven to be nearly impossible for the institution--and many Americans distrust it. This wariness colors the general public's debate on whether The Federal Reserve could make a successful and fair leap into the world of digital currencies. Issues such as lack of 'knowledge,' corporate bailouts based on no general rule, the purchasing of mortgage-backed securities, and newly released information that democrats outnumber republicans at The Federal Reserve 10.4:1 demonstrate explicit biases by those in control of monetary policy, further proving the dire need for a decentralized currency away from political influence. 

Finally, giving The Federal Reserve control of a digital currency essentially creates global cash that is merely easier to convert--it's not the cure-all panacea for the economy that some tout. As CNET points out, 'It's the virtual form of a fiat currency--that is, government-issued money that isn't backed by other commodities like gold or silver.' 

Senator Warren is wrong to support such an idea.

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