The Federal Reserve’s Lag in CBDC Development
A recent blog post from the Atlantic Council reveals that the U.S. Federal Reserve is falling behind other central banks, such as the Bank of China, in terms of developing a central bank digital currency (CBDC). The post highlights the lack of resources and personnel dedicated to CBDC development at the Federal Reserve, compared to its peers. The Bank of China, for example, has a team of over 300 people working on their CBDC, while the Federal Reserve’s team consists of only 20 individuals. Additionally, the Federal Reserve’s interbank settlement system, Fednow, has faced delays and limited adoption.
The Opposition to a CBDC
One of the reasons for the Federal Reserve’s lag in CBDC development is a belief that the dollar does not need to innovate. This belief is shared by Fed officials and politicians who argue against a CBDC, citing a lack of strong use cases and concerns about disrupting the current system. Former President Donald Trump has also expressed opposition to a CBDC and has vowed to block its creation if he is reelected.
Challenging the Comparison
However, an expert from the Federal Reserve Bank of Kansas City has questioned the comparison made between the Federal Reserve and central banks in centralized countries like Japan and the U.K. According to the expert, central banks in these countries have more independence and agility, allowing them to move faster than the Federal Reserve. The expert also suggests that the impact of U.S. community banks’ resistance to the CBDC is being overlooked.
Hot Take: The Need for Innovation
The U.S. Federal Reserve’s lag in developing a central bank digital currency is a miscalculation. While some officials and politicians believe that the dollar does not need to innovate, the reality is that payment innovation does not have to wait. The Federal Reserve must allocate more resources and manpower to CBDC development in order to keep up with its global peers. A proactive approach to innovation is necessary to ensure the U.S. remains at the forefront of the digital currency revolution and maintains its position in the global economy.
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