US Conservative Political Organization Makes Case Against CBDCs, Praises Bitcoin and Private Stablecoins
A fiscally conservative think tank doubts that central bank digital currencies (CBDCs) would be beneficial and wonders if they could even have negative outcomes.
In a new policy brief, the Club for Growth questions several of the main arguments that have been put forward for central banks to issue a government-backed cryptocurrency.
“CBDCs appear to be a solution in search of a problem. There is no obvious market failure that CBDCs are correcting.
The idea that CBDCs can help bank the unbanked without displacing the services of private commercial banks seems dubious.
The so-called improvements in monetary policy will consist of the central bank’s ability to circumvent the so-called zero-lower limit for nominal interest rates, but it is not entirely clear that this is an actual limitation for monetary policy or that such a characteristic is desirable.”
Zero bound is a term that refers to when central banks fail to stimulate an economy by cutting short-term interest rates that are already at or near zero.
The report adds that the prospect of CBDCs replacing cash altogether will deprive citizens of their right to privacy when conducting routine transactions.
“The potential elimination of physical currency will undoubtedly leave people worse off than the status quo and is part of a larger threat to privacy created by CBDCs.”
When it comes to CBDCs being touted as a solution to slow payment processing speeds, Club for Growth says “there’s no way a CBDC provides an obvious, superior alternative” to other privately built centralized ledgers like dollar-pegged stablecoins and Bitcoin (BTC) .
The brief concludes by pointing out that although there are a number of challenges facing the current financial system, it is not likely that central banks’ digital currencies will offer the best range of solutions to consumers.
“Proponents argue that CBDCs will bring significant benefits in terms of greater financial inclusion, faster payment processing, greater flexibility for monetary policy, and reductions in tax evasion and illegal activity conducted using physical currency.
Even taking all of these goals for granted, there is little reason to believe that a CBDC is the optimal policy solution to bring about these changes. Private solutions will undoubtedly provide a better means of making the payment system more efficient.
It is not obvious that monetary policy needs further flexibility, and any benefits of eliminating physical currency must be balanced against the costs of digital surveillance and loss of privacy.”
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