Ahead of a US Senate hearing on central bank digital currencies (CBCD) the American Bankers Association warned against the introduction of a digital dollar.
In statement to the Senate, the ABA warned that the introduction of a CBDC could “fundamentally change the role of the central bank in the United States and reshape the banking system.”
The banking lobby group pointed out that the US already had a robust and well-functioning financial system payment systems, and the country shouldn’t adopt a CBDC because other countries are doing so. Additionally, the peak body argued that a CBDC could draw away bank deposits, making lending more expensive if banks are forced to depend more on wholesale lending.
“After a careful review of the benefits and risks of various proposals to implement a CBDC, it does not appear that a CBDC is well-positioned to enhance underlying financial capabilities or extend the reach of financial services in well-developed markets, at least not in the US context, despite the overly optimistic promises from proponents,” the statement said.
Consider the risks
Should policymakers decide to move ahead with the development of a CBDC, the ABA urged them to do so with caution and carefully consider the risks and benefits of various CBDC designs.
“Given the additional complexity, delay, and transition costs involved in creating a new form of money, there are strong efficiency interests that suggest CBDC should only be pursued as a final option to meet clearly defined public policy goals that cannot be achieved through payments innovations that leverage existing digital dollars, the ABA said.
“As of today, those use cases have not emerged.
“If a viable use case for CBDC in the US does emerge in the future, design choices must be carefully considered to ensure that the benefits, as well as the risks of introducing a CBDC, are fully appreciated.”
Moreover, the ABA argued that choosing between the various CBDC designs requires “serious and complex policy trade-offs” and said current policy discussions are like “a movie highlight reel” that emphasises the benefits while downplaying the risks to consumers and the financial system.
The ABA believes that that any disruption might disrupt progress and reiterated that the responsibility of the central bank is to ensure financial stability.