The crypto industry is “sort of agnostic to mildly negative” on the idea of a central bank digital currency, according to the head of the Blockchain Association.
Blockchain Association Executive Director Kristin Smith raised privacy concerns about a potential CBDC during a Brookings Institute forum on Thursday. Smith appeared alongside Treasury Department Undersecretary for Domestic Finance Nellie Liang and other financial policy experts at a virtual event focused on digital assets and the future of payment systems.
Conversations about a government-issued digital currency continue to heat up in Washington. The Federal Reserve is weighing issuing a CBDC, which would act as a national stablecoin, and the Biden administration released a series of digital asset reports last week that touched on the topic. Lawmakers on the House Financial Services Committee also recently drafted a new version of a stablecoin bill after months of negotiations, which includes a provision mandating that the Fed continue its study of the issue and report to Congress its thinking on a digital dollar.
"In my view, I do think we need legislation," around stablecoins, Liang said.
The design choices that go into a CBDC are “incredibly important” and depend on whether the currency is intended for retail or wholesale, Smith said. While Smith, whose association represents major crypto firms like Circle, Kraken and Grayscale, as well as investors like Union Square Ventures and SkyBridge Capital, had critiques for the Biden administration’s digital asset reports, she offered praise for its look at CBDCs.
“I appreciated that the reports acknowledge having democratic values and privacy as part of the CBDC,” Smith said. “Particularly at the retail level, the last thing we do is the government has a database of all the transactions. We don’t necessarily want them to be able to get in and follow every little single thing that every individual citizen is doing.”
Smith pointed to China, a country that is poised to launch its own digital currency, as a cautionary example for the United States.
“If we look at China's vision for a CBDC, that is largely a tool for surveillance on their citizens. We don’t want that here in the U.S.” Smith said.
Fed Vice Chair Lael Brainard says that a CBDC decision isn't imminent, and that one consideration will be whether issuing one could displace financial intermediaries like banks, credit unions, and other consumer financial companies, an outcome that might upset the entire financial system. For now the central bank is more focused on its longtime faster payments project, FedNow, which it hopes to roll out next year.
Smith argued that by the time the Fed decides on a digital dollar, stablecoins may render one irrelevant.
“Eight years later, when you figure this out, we will have already taken over the world. ... Look at FedNow, right? It’s more like FedWhen. Is that coming anymore?” Smith said, joking and eliciting a laugh from Liang.
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