Powell pessimistic about purpose of CBDCs in IMF conference comments
The International Monetary Fund (IMF) recently hosted the "Cross-Border Payments: A New Beginning" conference, with Central Bank Digital Currencies (CBDCs) featuring heavily in the discussion. The first session discussed a vision for the future of cross-border payments, specifically including "the advent of digital currencies". The session featured an all-star cast, including:
Ahmed Abdulkarim Alkholifey - Governor of the Saudi Arabian Monetary Authority
Agustín Carstens - General Manager of the Bank for International Settlements
Jerome Powell - Chair of the US Federal Reserve
Nor Shamsiah Mohd Yunus - Governor of the Central Bank of Malaysia
Moderated by Kristalina Georgieva, Managing Director of the International Monetary Fund.
This panel acknowledged that the Libra project enlivened CBDC discussions globally, with the acknowledging the growing role of the private sector in the cross-border payments space.
Speaking on the thinking of a CBDC in the US, Powell said:
We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done. [...] In fact, I actually do think that CBDC is one of those issues where it’s more important for the United States to get it right than it is to be first.
Unsurprisingly, Powell elaborated that “getting it right” means that the US is much more concerned about the potential risks of a CBDC than it is about the potential benefits.
Powell went on to emphasise that other countries will of course have their own motivations for deciding to issue or not issue a CBDC. Powell argued that the main focus for the US would be determining “whether and how a CBDC could improve an already safe and active dynamic domestic payment system. In comments notably similar to those of the Reserve Bank of Australia recently, Powell continued:
Unlike some jurisdictions, here in the United States we continue to see strong demand for cash. Moreover, we have robust and mature financial and banking sectors, and we have a highly banked population, so that many, although not all, already have access to the electronic payment system.
This of course sounds a lot like the RBA's recent comments that, despite ongoing decline in the use of cash, as well as the broader digitalisation of the economy:
there does not seem to be a strong public policy case for [CBDC] issuance in Australia
It may well be that central banks will remain coy until the horse has bolted, and the need becomes undeniable. How this aligns with the Australia Prime Minister's plan to encourage adoption of technology rather than creation of technology remains to be seen.