The US Fed has increasing interest in CBDC, says Jeng at the Crypto Council for Innovation
Regulators worldwide are increasingly focused on the cryptocurrency industry following the multi-billion dollar collapse of the Terra/Luna stablecoin project, and the US is no different, with two separate bills to set regulatory rails for the industry introduced in recent months.
Still, finance officials in the world’s largest economy can learn from Asian counterparts when it comes to cryptocurrency regulation and innovation, said Linda Jeng, chief regulatory officer and general counsel at the Crypto Council for Innovation. She made the comments on a panel at Forkast’s “Crypto Rising: CBDCs & Stablecoins: The Asia Perspective” livestream event.
“The U.S. has a tradition of not regulating unless there’s an economic rationale to do so. So generally, U.S. regulators won’t step into a market that’s nascent,” she said, “Now that crypto is finally getting a lot of attention, does that mean we have actually reached a threshold of significance for policy makers and regulators.”
A CBDC is a digital currency issued by a country’s central bank. The U.S. Federal Reserve has requested congressional authority to begin work on such a project, and while it has not yet received the green light, it has continued to experiment with the technology, Jeng said.
These experiments include Project Hamilton by the Federal Reserve Bank of Boston, which released its whitepaper earlier this year exploring how to increase throughput on blockchains. But since blockchains record all transactions in perpetuity, such projects involve concerns about individual privacy and broader security concerns.
For example, Australian Senator Andrew Bragg said this week he would introduce legislation to regulate Chinese banks’ use of Beijing’s CBDC, e-CNY, in Australia, citing national security concerns, including the collection of user data.
Jeng, a former member of the Federal Reserve Board of Governors, said not all CBDCs are created equal.
“I can say pretty confidently that the Fed has no interest in collecting personal data from Americans,” she said, “It’s not only a huge responsibility, but also a burden that the Fed doesn’t want.”
Jeng said a Fed-issued CBDC would most likely start as a simple wholesale currency, before being complimented by a privately issued stablecoin — a cryptocurrency backed by real assets, such as the US dollar — riding on top.
In a country that values privacy and freedom of expression, Jeng said more needed to be discussed before such a project was rolled out.
“It would be important to actually clarify what rights Americans have to control their data and thus be able to control their digital assets,” she said, “and this is an area that we haven’t really spent a lot of time on.”
Meanwhile, Jeng said that blockchains are powerful, but they still have limitations, such as making different blockchains talk to each other.
“That’s the holy grail for engineers right now, to figure out how to make them interoperable,” she said, adding that she thinks they’ll get there soon. “And when that happens, the questions become, how are we going to have cross-border payments between the different countries and reduce frictions, improve trade?”
“These are all benefits that I am very excited about,” she said.
