Fed Governor Waller 'Highly Skeptical' of a Fed Digital Coin

Federal Reserve Governor Christopher Waller said he is "highly skeptical" about the need for the U.S. central bank to develop a digital currency. From a report: "While CBDCs continue to generate enormous interest in the United States and other countries, I remain skeptical that a Federal Reserve CBDC would solve any major problem confronting the U.S. payment system," Waller said in the text of remarks prepared for delivery Thursday to the American Enterprise Institute. The Federal Reserve Board stepped up its engagement on the possibility of a central bank digital currency in May when Chair Jerome Powell said the central bank will issue a paper outlining the Board's thinking on digital payments "with a particular focus on the benefits and risks associated with CBDC in the U.S. context." Powell said the central bank will also seek public comment on issues related to payments, financial inclusion, data privacy, and information security. The Boston Fed is also studying technologies around digital payments in conjunction with Massachusetts Institute of Technology in Cambridge, Mass.

I don't see a problem with a federal digital coin

[Rosco P. Coltrane]

It would be another form of the dollar, and strictly-speaking, the dollar is worth nothing more than what people are willing to believe it's worth. So sure, why not.

What I mean is, a fed-backed currency is just as much bullshit as Bitcoin or Ethereum at the end of the day. The difference is, the scam is huge, has been going on for centuries, and all the other countries in the world are willing to play along. That makes it more stable.

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[MobileTatsu-NJG]

The 'scam' is just a currency exchange. Don't forget you get your bitcoin news from a site that wants you to keep returning and spinning an ad-counter.

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[godrik]

It does depend on the form of the digital coin. But most digital coin can not easily support dumping a ton of new coins in the market or retiring a lot of coins. These are operations that the fed conducts regularly and need to conduct to keep a smooth sailing of the economy.

Though I suppose how you define digital coin. I suppose most of our money is digital in the sense that they are stored on the digital ledger of a bank and are mostly not composed of actual printed money. But I assume that "digital coin"

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[smooth wombat]

These are operations that the fed conducts regularly and need to conduct to keep a smooth sailing of the economy.

Like using billions of new dollars to bail out banks and other firms on a nightly basis because the banks and other firms are too inept to properly manage their funds? The unending purchasing then dumping of government securities to protect said banks and other firms?

The Fed should not be in the busines of bailing anyone out, just like the government should not be in the business of ba

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[Targon]

Do you need to manually convert your dollars to this federal digital currency? What sort of transaction fee will people get charged to do and use a system to accept payments? Who will be getting the kickbacks from running the system used to "hold" the digital currency? A better solution would be to keep the current system where every bank account has a logo on it that says that your account is tied to the federal system, and have that federal system be free and fee of transaction fees as well. Maint

What benefit would it offer?

[rsilvergun]

If you want to bring banking to the underserved there's already a well established way to do it that isn't prone to currency manipulation and doesn't waste electricity: Postal Banking.

We don't do it because the banks won't let us.

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[jonadab]

It's not so much a problem, as needlessly redundant. The US dollar is already a digital currency in every way that matters. I mean, no, it's not _only_ a digital currency. You _can_ get physical dollar bills and use them to buy things if you want, and some people do. Which is fine. But if you prefer to just pay electronically, using US dollars, you can already do that, and people do it all the time. When I buy junk on Amazon using my checking account, no _paper_ currency is exchanged by anyone anywher

Nothing good can come of it

[SuperKendall]

A federal currency where the government knows every single thing you purchase, and indeed controls what is allowed to be purchased and by who - such a system can and will be abused, no question.

Government is the worst place to try to contain such a system since government employees are protected from any consequences of misuse, and can only be removed or policy altered at best indirectly through voting in the right people, and hoping they do what they will say.

Hopefully there are enough people left in the U.S. that can see the major problems inherent in such a system that they will push back.

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[inode_buddha]

I wonder if the American Enterprise Institute even knows of the ramifications you mention. After all, they are one of the most deeply Conservative think tanks in the country. So perhaps he's just telling them what they want to hear? *shrug* dunno, don't care.

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[r2kordmaa]

A central bank wouldn't know what you bought any more than your private bank does. There is only a transaction from you to vendor, what for doesn't really concern the payment system, it's irrelevant and not recorded. Also, government doesn't really care about your expenses, only your income and taxes off of them matter.

How can they not know?

[SuperKendall]

A central bank wouldn't know what you bought any more than your private bank does.

We are not talking about a central bank. We are talking about the federal reserve (at best).

The transfer of digital currency would be just like making a credit card payment. My credit card certainly knows who I buy from, so how would whoever is running FedCoin would not?

At least with a credit card you have layer of laws between your purchase history and the government. With the FedCoin all you have is the hope that admins

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[jythie]

ahm, a central bank is exactly what the federal reserve is. That is simply the name of the US one.

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[SuperKendall]

Thanks for confirming the rest of what I said was correct, that the payees are of course known.. Gotcha!

Re:It's getting tracked either way

[bob8766]

A federal currency where the government knows every single thing you purchase, and indeed controls what is allowed to be purchased and by who - such a system can and will be abused, no question.

Government is the worst place to try to contain such a system since government employees are protected from any consequences of misuse, and can only be removed or policy altered at best indirectly through voting in the right people, and hoping they do what they will say.

Hopefully there are enough people left in the U.S. that can see the major problems inherent in such a system that they will push back.

In the current system most purchases are going through Visa or Mastercard who track everything and sell your data to whomever is paying. Oh, and if you are doing anything suspicious they will definitely let the government know about it. If you are in a business they don't like such as cannabis sales or porn they may cut you off as well.

With the Fed doing it directly at least it's not being sold to third parties and people trying to quit smoking aren't getting cigarette coupons in the mail.

The Fed at l

It will need to be stable.

[jellomizer]

A US Digital Currency will need to be a steady and predictable currency. Not like bitcoin that its value fluctuates massively where the cost of buying a Pizza 10 years ago could buy you a large publicly traded company today. Then with a poorly worded message from a CEO or a Fed Official, One could loose all their money.

We need an economy around actually making and selling products and services, not one that runs purely around what we think the value of our money is.

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[r2kordmaa]

Not a concern with CBDC-s, one digital dollar is worth exactly one paper dollar, no more no less. CBDC-s are not cryptocurrencies, don't mix them up, they are completely different things.

Way Too Risky

[EndlessNameless]

Imagine if there were a way to determine (definitively) when they printed money, including the time and the amount. There might be real personal, economic, or political consequences that they couldn't weasel away from.

If I ran the Fed, well... I wouldn't be a borderline criminal shithead in the first place. But if I ran the Fed like they do, I wouldn't want a mathematically-provable trail of evidence without some absolute guarantees about anonymity or the ability to mask certain details.

I expect they'd want some privacy protections that don't exist in other crypto currencies yet. Or maybe a track record to show that forensic accounting methods can't cause problems.

Never put old, non-technical people in charge!

[Targon]

There are different sides to what is going on. First, the idea of moving to a fully electronic way to process payments has been mentioned, and these old people they put in charge have zero knowledge or understanding of technology, so don't see a fairly direct way to handle this. The idea of a "electronic currency" should be seen for what it is, some way for them to steal money from people, because it just shows how little they understand even current technology. The idea of an electronic payment system...we already have the vast majority of businesses accepting credit card transactions, and those who do not primarily just don't want to pay the service fees associated with them. A federally operated system that has a 0 percent transaction fee would move things from "lets give Visa, Mastercard, Discover, and American Express a huge profit for doing virtually nothing", and moving to credit cards actually being there for times when you don't have the money available at that moment. If your bank card just tied into the federal system, and EVERY vendor accepted it(because it costs them nothing in fees), then it would save businesses a lot of money, plus the government would have a record of the transactions for your business, which would save a lot of headaches when it comes to filing your taxes. Some sort of digital currency on the other hand, would require some sort of transaction to move money from dollars to that digital currency in the first place, and also opens the door to the con of letting wealthy people who run some sort of private corporation get a cut...basically making another credit card company that the government has promoted, just so some people can make a fortune from doing nothing. The current cryptocurrencies avoid being linked to any one country, so will be seen as a good way to keep government out of their business, but that also makes governments suspicious due to not being transparent.

return of eCash

[Comboman]

Back in the day (1980s?), this concept was called eCash. I think a few European countries experimented with it but it never really caught on. Governments would rather let private companies (Visa, Paypal, Venmo, Apple, Mobile phone companies) take the risk of building and running the infrastructure. So now cash is virtually obsolete but there isn't a single, universally accepted replacement (and unlike cash, everyone is taking their cut off the top).

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[avandesande]

We already have this, it's called a credit card. But at least with credit card we have recourse if someone fraudulent transacts against your account.

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[Targon]

For a business to accept credit card transactions, they need to pay money, plus pay transaction fees to whatever payment processing company it may go through. That is the problem with credit cards as they are designed currently, the costs on the back end that consumers generally don't care about. A federal system that doesn't cost businesses money to accept card based payments would open up electronic payment methods to businesses that already have a low level of profit, or have low priced items where t

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[avandesande]

I have a 1.5% cash back card, so now the CC company is only making 1.5% on the transactions. I think that is a good deal considering protection from fraud or lost/stolen card and it is a lot more convenient to slip a card into a reader than fooling with some wallet app on my phone.

The need will become obvious

[r2kordmaa]

Once more countries actually deploy CBDC-s it'll quickly become apparent why no sensible central bank wants to be among the ones that lag behind.

Solution?

[jythie]

Exactly what problem would a CBCD solve? The only two I can think of is if you were going to build a system from the ground up and banks did not trust each other it would be a way to distribute the transaction ledger in a way that no single bank could cheat,.. or if the banks wanted to eliminate payment processors like credit card companies, taking that business for themselves... which I doubt even the federal reserve would want to take on both Visa and Mastercard.

I guess maybe if they were already thinki

What problem would this address?

[Applehu Akbar]

Regular dollars are already digital for all useful and legal applications of 'digital.' What features would a new digital dollar add? The Fed isn't going to implement any currency that would be anonymous or untraceable, which eliminates the two biggest use cases for Bitcoin, Monero, et. al.

Vulnerable?

[VeryFluffyBunny]

Thinking of recent stories of adversarial state sponsored hacking, I wonder how much more vulnerable it would make an economy & the society that depends on it. Shouldn't the USA be reducing its risks to such threats?