Last updated on November 2, 2023
In a recent discourse at Harvard Law School, Fed Governor Michelle Bowman expressed her skepticism about the need for the U.S. central bank to develop a digital currency, known as a central bank digital currency (CBDC). Bowman believes that existing alternatives, such as private sector innovations like instant payments, may be more effective and efficient in addressing frictions in the payment system and promoting financial inclusion. She specifically pointed to the Fednow instant payment system as an example of infrastructure improvements that have already been made in the traditional banking system.
Bowman also highlighted the significant risks and tradeoffs associated with CBDCs, including potential unintended consequences for the U.S. banking system and concerns about consumer privacy. She emphasized the need for more research on CBDCs and suggested that the central bank should continue monitoring international developments. Ultimately, Bowman is not convinced that a U.S. CBDC could solve the identified issues more effectively or efficiently than existing alternatives, and believes that the potential benefits remain unclear.
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