MNI: Fed's Quarles Skeptical of Benefits of Digital Dollar

Federal Reserve Vice Chair for Supervision Randal Quarles Monday expressed doubt about the benefits of a digital dollar, pressing that the Fed is no need to compete against domestic stablecoins or foreign competitors such as China's digital currency.

"First, the U.S. dollar payment system is very good, and it is getting better. Second, the potential benefits of a Federal Reserve CBDC are unclear. Third, developing a CBDC could, I believe, pose considerable risks," he said.

The dollar is already highly digitized, he said, and even if other central banks issue successful CBDCs, "we cannot assume that the Federal Reserve should issue a CBDC."

Quarles, speaking as the Fed prepares a comprehensive discussion paper on CBDCs and a digital dollar that is due to be published later this summer, said while that process is genuinely open without a foregone conclusion, "the bar to establishing a U.S. CBDC is a high one."

DISMISSIVE

Dismissing the notion that the Fed needs to develop a CBDC to defend the U.S. dollar and skeptical that CBDCs are a particularly good tool to overcome longstanding economic inequalities in American society, Quarles said potential use cases for a CBDC need to justify such costs and expansion of the Fed's responsibilities into unfamiliar activities.

Quarles also joined Chair Jay Powell in expressing skepticism that the Fed has the legal authority to move on CBDCs, without input from Congress.

But "the recent clamor over CBDCs makes it appropriate to explore the benefits, costs, and practicalities of implementing one in the United States if such legislative authority were granted," he said in prepared remarks to an annual Utah Bankers Association Convention.