WASHINGTON—The Senate Banking Subcommittee held a hearing this week to examine the digital dollar, focusing on ensuring privacy, security, and countering China’s attempts to become the reserve currency.
During the hearing, senators focused on the challenges and merits of a digital currency. Additionally, there was a discussion by the subcommittee on how a digital dollar could help unbanked people have access to digital dollars, NAFCU reported.
The witnesses all agreed on the need for a central bank digital currency and stressed that the digital dollar should also have the ability to be loaded on a card.
“Central bank digital currency might have the potential to increase financial inclusion, reduce transaction costs, and become a platform for innovation in payments, if designed and implemented in the right way. In order to determine and realize these benefits we must first invest deeply in multidisciplinary research and development,” Dr. Neha Narula, director of the Digital Currency Initiative, told the hearing.
Lev Menand, an academic fellow and lecturer in law at Columbia Law School, testified, “Money is basic infrastructure. It is the backbone of the economy and a core public good. Unfortunately, our monetary system is antiquated and decaying. If the government allows it to become even more private, dominated by cryptocurrencies, deposit substitutes, and foreign fiat money, we are bound to face worse financial crises and economic contractions. A CBDC (central bank digital currency) like FedAccounts can be part of the solution.”
‘Enshrine’ Values
Christopher Giancarlo, senior counsel, Willkie Farr & Gallagher, stated the U.S. should modernize the dollar to “make sure that the values that are enshrined in the dollar today–values like freedom of speech, individual economic privacy, free enterprise and the rule of law–are encoded in the digital future of money. The time has come to explore the opportunities and challenges of a US CBDC through well-crafted and carefully executed pilot programs conducted in thoughtful partnership between the public and private sectors in the best tradition of American innovation. The time has come to explore the digital dollar.
The Priorities
During his testimony, Dr. Darrell Duffie, an Adams distinguished professor of management and professor of finance at Stanford University Graduate School of Business, said the United states should now begin a significant program for the development of a digital dollar.
“The design should prioritize the efficiency of payments, privacy, interoperability, financial inclusion, and the ability to monitor payments for compliance. Even a well-resourced development program can be expected to take a number of years to achieve a successful design,” he said. “The final decision to deploy the digital dollar can be delayed until more is learned. In parallel with the development of a digital dollar, efforts should continue to be made to improve the competitiveness and efficiency of the legacy U.S. payment system.”