Fed Vice Chairman Michael Barr, CBDC Decision Far Off

Michael S. Barr Vice Chair of the Federal Reserve

  • Federal Reserve Vice Chairman Michael Barr has emphasized the US’ cautious approach to developing a central bank digital currency (CBDC).
  • He emphasized the need for strong executive support and Congress’s authorization before any concrete actions are taken.
  • The FedNow real-time payments network, although limited, is expected to grow in usage over time.

Federal Reserve Vice Chairman Michael Barr has shed light on the United States’ cautious approach to the development of a central bank digital currency (CBDC). Barr stated that the Federal Reserve is currently engaged in what he termed as “basic research,” underscoring the distinction between research and the decision-making process required for advancing payment system innovations.

Barr emphasized the necessity for strong support from the executive branch and the enactment of authorizing legislation by Congress before any concrete actions are taken. He pointed out the complex nature of navigating through a divided Congress, particularly in light of the sharp criticism that Republican lawmakers have directed towards the idea of a digital dollar.

Moreover, Barr stressed the urgency for Congress to address the issue of stablecoins, which are cryptocurrencies tied to stable assets like the U.S. dollar. He expressed ongoing concerns regarding the issuance of stablecoins without robust federal oversight, citing potential risks to financial stability, monetary policy, and the overall U.S. payments system if non-federally regulated stablecoins were to gain widespread acceptance.

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Barr underscored the significance of establishing a suitable legislative and regulatory framework to proactively address these potential risks.

In addition to these concerns, the Federal Reserve recently introduced the FedNow real-time payments network. Some proponents have speculated that this system could compete with certain features offered by stablecoins. While Barr acknowledged that the current utilization of FedNow is limited, he anticipates a growing participation in the network over time.