The US Treasury Department is still studying design decisions regarding the introduction of a central bank digital currency. Under Secretary for National Finance Nellie Liang presented on March 1 at the Atlantic Council an overview of the technical and policy issues being considered by the Treasury-led CBDC Working Group.
Liang discussed wholesale and retail CBDCs (wCBDCs and rCBDCs), noting that wCBDCs raise more technical issues, while rCBDCs involve access issues. He mentioned, in particular, that “institutions that are currently ineligible for central bank accounts” could have access to a wCBDC.
According to Liang, a wCBDC could also be used for interbank settlements with tokens or securities transactions. It could also support stablecoins:
“A wholesale CBDC could also be used as a backing asset for stablecoins, which could facilitate the transfer of value between stablecoins, as well as support greater interoperability and choice.”
Liang reiterated the Federal Reserve Board’s position that an intermediated rCBDC would best serve the country’s interests, saying that determining the range of intermediaries for an rCBDC is an important political issue. An rCBDC could improve financial inclusion, she said. The United States currently has the largest unbanked population in the G7, she added.
#CBDCwatchhttps://t.co/rJk6YHrZc3
— Caitlin Long ⚡️ (@CaitlinLong_) March 2, 2023
Liang was doubtful that an American CBDC would help prop up the role of the dollar internationally:
“In my opinion, the global demand for the dollar is due to structural factors, such as our respect for the rule of law, the strength of our economy, and the depth, breadth, and openness of US financial markets.”
In this regard, he echoed the views expressed by Federal Reserve Governor Christopher Waller last year.
Liang repeated the now standard warning that the Treasury would not issue a CBDC without congressional support. A CBDC is just one of several options available to “enhance the legacy capabilities of central bank money,” Liang said. He noted that the FedNow Service instant payment system is expected to go live this year.
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