Fed Governor Christopher Waller Says US CBDC Not Necessary for Dollar’s Supremacy

Federal Reserve Governor Christopher Waller on Friday expressed his hesitation towards the creation of a U.S. central bank digital currency, saying that the digital currency is likely not important to the long-term status of the U.S. dollar.

Waller made such comments while delivering a speech at a symposium sponsored by the Harvard National Security Journal in Cambridge, Massachusetts, on Friday.


The Fed governor said although his views on central bank digital currencies (CBDCs) are well known, he remains strongly unconvinced that there is a compelling need for the Fed to create a digital currency.

Waller said those who advocate for the development of a U.S. CBDC often say how it is significant for the long-term status of the dollar, especially as other major jurisdictions are moving towards adopting a CBDC.

He disagreed with such claims, stating that: “The underlying reasons for why the dollar is the dominant currency have little to do with technology, and I believe the introduction of a CBDC would not affect those underlying reasons.”

The Fed governor explained what could occur to the dollar’s role as the global reserve currency of choice if other countries adopted the digital currencies and the U.S. did not. He said factors making the dollar attractive for holding value and conducting international business would remain majorly unchanged, and the challenges that a CBDC might resolve could be achieved through other means.

Waller said: “The dollar serves as a safe, stable, and dependable form of money around the world. I don’t think there are implications here for the role of the United States in the global economy and financial system.” He, therefore, said people should instead focus and talk about the relevant CBDC-related topics, such as its impacts on financial stability, payment system improvements, and financial inclusion.

Waller’s comments come as a response to recent arguments posted by his fellow board members and other lawmakers favoring the introduction of a US CBDC.

 In July, Fed Vice Chair Lael Brainard said a CBDC would be a “natural evolution” of the payments system, saying the digital currency could play a key role in protecting financial stability. Lawmakers like Rep. Jim Himes, D-Connecticut, have also been outspoken advocates for the establishment of a U.S. central bank digital currency.

The digital currency remains a hot topic for the US government. In March, President Joe Biden issued an executive order on digital assets. And based on the report, Biden wants the US to lead in a space that China is far more advanced in with its digital Yuan projects. But a digital dollar could take years to develop because different stakeholders see multiple problems with rolling out a digital currency from the Federal Reserve.

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Fed Governor Waller praises stablecoins as a genuine innovation that makes the development of CBDCs redundant

In a speech published Wednesday noon, Federal Reserve Governor Christopher J. Waller reiterated his skepticism for implementing a central bank digital currency, or CBDC, in the United States. However, Waller is not an ordinary cryptocurrency skeptic, as he cites the development of genuine private-sector payment innovations, specifically stablecoins, as the reason why CBDCs are not needed.

Top Stablecoins by Market Capitalization | Source: Treasury Report on Stablecoins (Nov. 2021)

Despite the positive outlook, Waller highlighted three risks surrounding stablecoins. The first of which he noted as a potential destabilizing run, where unregulated or unscrupulous issuers provide financial instruments that go bad, creating a panicked flight to safety that extends beyond initial investors and depositors.

He noted a secondary risk involving payment system failure, where responsibility for different payment functions become scattered across the network due to stablecoins’ decentralization. He supposed that this could lead to a wide variance in the appropriate standards of clearing and settlement.

Thirdly, Waller said that stablecoin adoption comes with the risk of scale, i.e., the emergence of a mega-stablecoin monopoly from one single issuer could hurt competition and decreases network benefits to consumers.

Waller went on to praise the decentralized aspects of stablecoins during his speech, saying “The Federal Reserve and the Congress have long recognized the value in a vibrant, diverse payment system, which benefits from private-sector innovation.” He continued:

That innovation can come from outside the banking sector, and we should not be surprised when it crops up in a commercial context, particularly in Silicon Valley. […] We should give those innovations the chance to compete with other systems and providers —including banks — on a clear and level playing field.

In recent years, United States regulators have taken an increasingly soft, but nevertheless interventional stance on stablecoins and cryptocurrencies as a whole. Another entity, the


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