The Feds want dollars to move much faster
Dollars should be faster by now, and the White House wants to do its part to speed them up.
Driving the news: Based on a fact sheet summarizing several reports coming from the Biden administration today, stemming from the President's March executive order, the administration is prioritizing speeding up domestic and international payment.
- That includes readying the way for a potential U.S. central bank digital currency (CBDC).
Why it matters: "Digital assets present potential opportunities to reinforce U.S. leadership in the global financial system and remain at the technological frontier. But they also pose real risks as evidenced by recent events in crypto markets," per the White House fact sheet on the "Comprehensive Framework for Responsible Development of Digital Assets."
- Other reports address illicit finance, international cooperation, U.S. competitiveness and other matters relevant to what Washington likes to refer to as "distributed ledger technology."
- According to the fact sheet given to reporters, nine reports have been issued to the White House under the executive order.
What they're saying: "Innovation without adequate regulation can result in significant disruption," Treasury Secretary Janet Yellen said on a call with reporters Thursday. "Digital assets and other emerging technology could offer significant opportunities."
- Of note: As Yellen broke down the various recommendations from the reports, the first one she mentioned related to preparing the government for a dollar-based CBDC, should the Federal government decide to pursue one.
- During an industry event in Manhattan, meanwhile, Fed vice chair Lael Brainard said that her agency would only consider a CBDC intermediated through banks.
Both Yellen and the White House fact sheet also highlighted instant payment systems, such as FedNow and the banking industry's Real Time Payments system.
- There are concerns about crypto's answer to instant payments and CBDCs, so-called stablecoins, a little-regulated market that has a $153 billion size.
- Other recommendations addressed crypto as it relates to financial inclusion, its use in crime and the laundering of criminal proceeds.
A senior administration official declined to speculate on whether a CBDC would require action from Congress, saying, "We're not going to get ahead of ourselves right now."
What's next: The fact sheet details several ways in which the Federal government is looking to advance faster payments in the United States and internationally. They include:
- Encourage payment providers to actually adopt and promote instant payment technology, such as FedNow and Real Time Payments.
- Work to align international payment systems with those in the U.S. to facilitate easier cross-border payments.
- Back research into "technical and socio-technical disciplines and behavioral economics" to make digital payment systems more inclusive.
In the weeds: "Recognizing the possibility of a U.S. CBDC, the Administration has developed Policy Objectives for a U.S. CBDC System, which reflect the federal government’s priorities for a potential U.S. CBDC," per the fact sheet.
- While instant payments may well address most of the problems that a CBDC would solve, a senior administration official noted that because a CBDC is a liability of the Federal government, that makes it different from systems like FedNow.
Our thought bubble: It's hard not to recognize that the possibility of a U.S. CBDC seems much more likely than just "possible."