The American Bankers Association, which represents banks in the U.S., is warning against the potential risks associated with the use of digital currencies. In a letter to the U.S. Department of Commerce, the ABA noted that the benefits of a digital currency, such as the CBDC, are not yet realized. It is also said that the costs associated with its use are significant.
The Fed Should Not Issue CBDCs
Although the U.S. does not currently plan on launching a digital currency, the Fed has been exploring the potential of cryptocurrencies known as CBDCs. In early 2022, the central bank released a report that comprehensively analyzed the risks and benefits of these digital assets.
The Fed’s report was a first step in establishing a CBDC in the U.S. In addition, they were designed to discuss the various implications of a CBDC in the country.
In May, the Commerce Department released a request for public comment regarding the executive order that called for agencies to report on the use of digital assets. The comment period for the department’s request closed on July 5.
The organization noted that the proposed regulation would significantly impact the financial system and society as a whole. It said that creating a central bank digital currency would significantly impact the relationship between the Federal Reserve and the public. However, it noted that both must make various trade-offs to implement the regulation.
Regulation Should Still Take Place
ABA, which is known for representing the banking industry, also noted that the proposed regulation would significantly impact financial institutions’ operations. Its comments come as the debate over using a US CBDC has become increasingly political.
It noted that creating a central bank digital currency would significantly impact the relationship between the Federal Reserve and the public. Critics also pointed out that using a CBDC could threaten the privacy of individuals.
Other organizations that responded to the Commerce Department’s request for public comment included the Blockchain Association and the Chamber for Digital Commerce. While it did not go as far as to oppose the development of a central bank digital currency in the U.S., the Chamber for Digital Commerce noted that the country should adopt a more complementary approach to the issue.
Other Countries are Enthusiastic about CBDCs
One of the most prominent projects in the CBDC space is China’s digital renminbi or DCEP initiative, which was in trials during the fourth quarter of 2020. The project is aimed at challenging the dominance of the U.S. dollar. China launched the initiative in 2014 and has positioned it as a direct challenge to the U.S. dollar’s global dominance.
The Marshall Islands also plans to launch a new financial inclusion platform called Marshallese Sovereign, built on the Algorand blockchain. It will allow people to make financial transactions and manage their finances. However, before using the platform, they will have to undergo a verification process.
Since at least 2020, Brazil has been exploring the possibility of establishing a CDBC following the successful launch of PIX, an instant payment system developed by the country’s central bank. Over seven billion transactions have been on PIX, and over 60% of the country’s adult population is PIX users. The BCB noted that it has the necessary infrastructure to launch a digital currency in 2022, and a final version is expected to be launched in 2024.
Meanwhile, in July, the European Central Bank announced that it was working on a digital version of the euro. According to Christine Lagarde, the bank’s president, it aims to ensure that people and firms have the same access to the safest form of money.
Source: https://crypto.news/the-american-bankers-association-holds-resistance-against-fed-issuing-a-cbdc/