Dallas Fed president who backed idea of CBDC steps down

The regional banks of the Federal Reserve and governors are split on the idea of a CBDC

Skyline of Dallas, Texas                                 
President of the Federal Reserve Bank of Dallas Robert Kaplan is to resign – Photo: Shutterstock
                                

Robert Kaplan, president and CEO of the Federal Reserve Bank of Dallas, has announced that he will be stepping down from his position earlier than intended. Kaplan was a vocal supporter of the idea for US to have a Central Bank Digital Currency (CBDC).   

The Federal Reserve Bank of Dallas is one of 12 regional banks of the US Federal Reserve.

Kaplan resigned from his position early amid an ongoing stock market trades controversy in which he is embroiled.

Recently, it emerged that Kaplan had traded stocks in companies such as Apple, Amazon, Facebook and Google while holding the position as the Dallas Fed president and casting his vote on US monetary policy.

In a statement Kaplan said: “The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve’s execution of that vital work. For that reason, I have decided to retire as president and CEO of the Federal Reserve Bank of Dallas, effective from Friday, 8 October 2021.”

The Dallas Fed president did, however, say that “my securities investing activities and disclosures met Bank compliance rules and standards”.

Backed the idea of a CBDC

Kaplan was an advocate of the US developing a CBDC, with opinions seemingly split on cryptos and CBDCs in the Fed. Back in November 2020 at a virtual conference, Kaplan said it was “critical for the Fed to work on developing a digital currency in the months and years ahead”.  

On the other hand, Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, while speaking at the Pacific Northwest Economic Region’s annual summit on 17 August, called cryptocurrencies out, describing them as “fraud” and “garbage coins”.

Kashkari said: “I was more optimistic about crypto or bitcoin about five or six years ago. So far, what I’ve seen is 99%… let me be charitable, 95% fraud, hype, noise and confusion.”

The Minneapolis Fed president added that “thousands of these garbage coins” are being created and alleged that their main use is to fund illegal activities.

Fed governors’ differing views on CBDCs

Also, during August this year, two members of the Fed’s Board of Governors voiced conflicting opinions on CBDCs.

Fed governor Christopher Waller said he was “highly sceptical” that the Fed actually had a “compelling” case to create a CBDC. Waller made these remarks at the American Enterprise Institute in Washington, DC on 5 August.

During the event, Waller asked what problems a CBDC would solve. As an example, he asked: “If physical currency disappeared, would a CBDC actively help?”

Waller then pointed out: “Chair [Jerome] Powell has made clear that US currency is not going to be replaced by a CBDC. Thus, a fear of imminently vanishing physical currency cannot be the reason for adopting a CBDC.”

Waller also asked if a CBDC would help to expand the reach of the US payment system and commented: “It doesn’t look that way to me.”

As the existing US payment services already have nationwide reach, Waller said he feels a CBDC would not make a difference in this sense. He added: “Account holders at US banks can transfer funds abroad to account holders at foreign banks.”

At the beginning of August, US Fed governor Lael Brainard reportedly spoke out strongly in favour of a CBDC while speaking at the Aspen Institute’s Economic Strategy Group, concluding that it was a matter of “urgency” for the US central bank to develop one.

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency – a CBDC offering – and the US doesn’t have one, I just can’t wrap my head around that. That just doesn’t sound like a sustainable future to me,” said Brainard, according to Reuters.

Brainard put particular emphasis on China having a CBDC and the problems this could cause for the US if it did not have its own version.

Further reading: US CBDC: What we know about Fed‘s plan for a digital currency

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