US CBDC would ‘crowd out’ crypto ecosystem: Ex-Biden adviser
The creation of a US digital dollar would “crowd out” the cryptocurrency ecosystem and protect US national security, according to a former top adviser in President Joe Biden’s administration.
Daleep Singh – a former deputy national security adviser for international economics in the Biden administration – made the comments at a Senate Banking Committee hearing on February 28, suggesting that cryptocurrencies facilitate ransom attacks and help evade US sanctions.
Singh believes the US government’s embrace of a central bank digital currency (CBDC) “is the best single step we can take [to protect national interests] because it would displace the crypto ecosystem.”
Singh frames “crowding out” as a desirable development in his discussion of a CBDC, but the term is typically used by economists to refer to how investment by governments can drive down or eliminate investment from private firms that can limit job creation and slow economic growth.
In an interview with Cointelegraph in May 2022, Franklin Noll – the president of consulting firm Noll Historical Consulting – also suggested that CBDCs could displace crypto, noting:
The downside for crypto is that the CBDC will work to displace private cryptocurrencies, especially stablecoins that are focused on retail payment areas. Cryptocurrencies will remain in niches in the payment system where they serve unique functions and offer specialized services.”
While China has implemented its own CBDC, the United States is still exploring the potential benefits and risks associated with CBDCs.
Yana Fanusie, the policy director at the crypto advisory group Crypto Council for Innovation suggested in an interview with Bloomberg on March 1 that China is “leading the way” in CBDC development while the US is “on the sidelines.”
Related: Bank of England has no technical skills to issue CBDC yet: Deputy Governor
He added that developing alternative financial rails could create “trouble” for the US as they affect the “strength” of its power to enforce sanctions.
Others are more critical of the digital dollar plans such as Representative Tom Emmer, who introduced legislation on February 22 that prohibits the Federal Reserve from implementing monetary policy based on a CBDC and issuing a digital dollar directly to individuals.
Emmer is concerned that a CBDC could affect the financial privacy of American citizens, and be developed into a “dangerous surveillance tool.”
