The development of central bank digital currencies (CBDCs) has accelerated in 2022 and is heading into 2023. Critics are worried, however, that the increasing adoption of CBDCs might trigger liberty and privacy concerns, as there’s no limit to the extent of control the government could have over its citizens. Despite these concerns, central banks intend to digitize their currencies within the next decade.
The Federal Reserve Bank of New York recently launched a 12-week pilot program with nine major financial institutions, including Citigroup, Mastercard, and Wells Fargo, to experiment with a CBDC and a proof-of-concept digital money platform called the Regulated Liability Network.
The project aims to determine how banks use digital currencies in a public ledger and if this system would speed up payments.
Although the New York Fed noted that it wouldn’t use the results to form policy or decide about establishing a CBDC, the central bank has come under pressure from Washington to keep up with nations that have digitized their currencies, particularly China.
The White House claimed a CBDC “has the potential to offer significant benefits.”
In September, Secretary of the Treasury Janet Yellen endorsed national efforts to “advance policy and technical work” on a CBDC since “some aspects of our current payment system are too slow or too expensive.”
This past summer, Rep. Jim Himes (D-Conn.) submitted a proposal for the issuance of a CBDC by the Federal Reserve, arguing that it would help ensure that the U.S. dollar maintains its global reserve currency status.
“Over the last few years, we have seen other governments make real progress in establishing a central bank digital currency,” Himes said in a statement. “The longer the United States government waits to embrace this innovation, the further we fall behind both foreign governments and the private sector.”
A growing number of Fed officials agree that the United States needs to start exploring the adoption of a virtual currency.
By Andrew Moran
