As digital currencies continue to gain traction, the United States has yet to make a firm decision on whether to pursue a central bank digital currency (CBDC). At the recent Transform Payments USA 2023 conference, Graham Steele, Assistant Secretary for Financial Institutions, revealed that the Treasury Department is leading an interagency working group dedicated to studying a potential U.S. CBDC.
Not only are CBDCs being researched by roughly 114 countries, representing 90% of global GDP, but there is a need to strike the right balance between factors such as global financial leadership, national security, privacy, illicit finance, and financial inclusion. However, the risks associated with CBDCs and their potential impact on retail banking should not be overlooked. For instance, the danger of bank runs could be magnified due to the ease and speed of transactions in a CBDC system.
Furthermore, privacy concerns surrounding CBDCs have been mounting, as evidenced by a recent Cato Institute poll showing that only 16 percent of Americans support such a currency. Steele acknowledged these concerns while discussing privacy and anonymity preservation. Additionally, he highlighted the need to explore Privacy Enhancing Technologies (PETs) while ensuring transparency and traceability in digital financial transactions. This would ultimately help to reinforce the trust of users.
Despite many officials remaining crypto-skeptical, it’s worth noting that Bitcoin, Ethereum, stablecoins, and other cryptocurrencies were not mentioned in Steele’s commentary. The focus of the working group seems to lie in exploring the possibilities of a CBDC accompanied by robust security measures that would ensure the protection and privacy of its users.
The rapid digitization of financial services demands that industry leaders work closely with policymakers to address any potential shortcomings. Regardless of the U.S. government’s eventual approach to digital currencies, whether they be private or public, preparations are being made for this approaching technological revolution.
Given the current landscape, it’s crucial to weigh the pros and cons of implementing a CBDC system in the United States, all while considering the impact it would have on privacy, security, and financial inclusion. Ultimately, the nation’s digital financial future rests on finding a balance between innovation, trust, and protection.
In conclusion, although the U.S. is still undecided on pursuing a CBDC, the ongoing research and consideration of privacy-enhancing technologies demonstrate the country’s efforts to prepare for an increasingly digital financial landscape. As the world transitions toward greater reliance on digital currencies, the importance of balancing innovation with security and privacy cannot be understated. For now, the U.S. continues to tread cautiously on the path towards digital currency adoption.
Source: Decrypt
