Amid elections, the US CBDC debate intensifies – Is a digital dollar necessary for the nation?
As the 2024 presidential race heats up, the conversation surrounding a U.S. Central Bank Digital Currency (CBDC) intensifies. The differing views of the candidates reflect broader concerns about privacy and government control.
As of January 2024, the U.S. approach to CBDCs is characterized by caution and gradual progress, particularly when compared to the advancements made by other countries. Currently, 11 nations have fully implemented digital currencies, while China, India, and several others are in the pilot phase.
In the U.S., progress on a retail CBDC, which would be directly available to consumers, has been minimal. However, there is movement forward on a wholesale CBDC, which focuses on transactions between banks.
In light of this, the Federal Reserve is approaching the idea of a digital dollar with caution. Fed Chair Jerome Powell expressed interest in a digital dollar in 2022 but acknowledged the need for careful consideration due to the global significance of the dollar.
Currently, the U.S. is prioritizing research and development in this area. Projects like the joint effort between the Bank of Boston and the MIT Digital Currency Initiative’s Project Hamilton, as well as the Bank of New York’s Project Cedar, are exploring the technical aspects of CBDCs.
Simultaneously, the U.S. stance on CBDCs has become a topic of interest in the political sphere, particularly in the context of the 2024 presidential election. Concerns have arisen regarding privacy and the potential for a CBDC to facilitate government surveillance, leading to opposition from some political figures.
To delve deeper into this issue, it is crucial to understand the perspectives of the presidential candidates on CBDCs and whether the U.S. truly needs one.
The stance of U.S. presidential candidates on CBDCs has emerged as a significant topic in the 2024 election cycle, with clear divisions in views, particularly within the Republican Party.
Former President Donald Trump has taken a strong stance against CBDCs, vowing to prevent the creation of a U.S. CBDC if reelected and labeling it a “dangerous threat to freedom.” Trump’s concerns revolve around the potential for a CBDC to grant the federal government extensive control over citizens’ finances, including the ability to monitor and potentially seize funds without individuals’ knowledge.
This perspective aligns with other Republican candidates, such as Florida Governor Ron DeSantis, who has proposed legislation to ban the use of CBDCs in Florida, framing it as an attempt by the federal government to increase surveillance and control over financial transactions.
Within the Democratic field, Robert F. Kennedy Jr. has also expressed reservations about CBDCs, warning of their potential to become tools of social surveillance and control due to the lack of anonymity associated with digital currencies. Kennedy raises concerns about the government’s ability to monitor private financial affairs and enforce transaction restrictions, suggesting that CBDCs could lead to greater government intrusion into individuals’ lives.
On the other hand, President Joe Biden has shown a cautious but forward-looking approach to CBDCs during his term. In April 2022, he signed an executive order authorizing the Fed to assess the risks and opportunities of a U.S. CBDC. However, no formal design or release date for a U.S. CBDC has been announced under Biden’s administration.
From an economic perspective, the introduction of a U.S. CBDC could have significant implications. It could streamline payment systems, reduce transaction costs, and transform monetary policy implementation. For example, during the COVID-19 pandemic, the distribution of stimulus payments was delayed due to logistical issues, but CBDCs could enable quicker and more direct implementation of such measures in times of crisis.
However, the introduction of a CBDC also raises questions about the role of commercial banks and the dynamics of money supply and demand. The potential for a CBDC to bypass traditional banking intermediaries could disrupt current financial models and impact bank deposits and lending activities.
Furthermore, the global financial landscape, where the U.S. dollar holds a dominant position, could be influenced by the introduction of a U.S. CBDC. There is a debate on how it could affect the dollar’s role as the world’s reserve currency, especially in the face of competition from digital currencies like China’s digital yuan. Some experts argue that a well-designed U.S. CBDC could strengthen the dollar’s global standing, while others caution against potential risks to its established position.
The ongoing research and exploration conducted by the Federal Reserve and other institutions are critical in determining the most appropriate course of action for the U.S., as it directly impacts the world economy and the global state of affairs.
