Fed ex-CEO: “The e-dollar will be a substitute for cash”
“The US CBDC will be resilient and safe,” said the ex-CEO of Boston Fed
Bitcoin, stablecoin and the US Central Bank Digital Currency (CBDC) will coexist in the future, said Eric S. Rosengren, as the Fed gears up to release its working paper on the possible evolution of the e-dollar.
“The e-dollar will be a substitute for cash. It would be resilient and safe and it won’t be based on blockchain”, anticipated the former President and CEO of the Federal Reserve Bank of Boston, who retired just a few days ago leaving a key board seat empty at the 600 of Atlantic Avenue in Boston.
“It is a political challenge to find an agreement on the discussion on CBDC policies. However, I am confident that ethical issues like security and privacy can be overcome over time. Still, significant work has to be done, however, what can be said is that a US CBCD, for operational reason, cannot be based on blockchains, as transactions require a certain speed, and must cut down cryptocurrencies’ high risks,” Rosengren added.
A remarkable step to a US CBDC
The speech, marking the first time the US Fed opened up to CBDC, happened at the Bretton Wood Committee meeting on Global standards for digital currencies, on Tuesday 12 October.
So far, the Boston Fed experts were working on research around a “hypothetical” digital currency, pioneering exploratory work on technologies and using cases to support a potential US CBDC far to come, as the international bank system seemed not to be ready to embrace digital currencies.
“We are already providing digital infrastructure to the payment system, but the rest of the infrastructures should be provided by financial institutions,” Rosengren added.
“The next disruptor”
As financial services company Moody’s observed in a report titled ‘Central banks aim to limit disruption when designing retail digital currencies’: “disintermediation and fee loss risks will be heightened as banks adapt to CBDCs. Although not meant to compete directly with bank deposits, CBDCs would provide an attractive risk-free alternative, raising bank funding costs.”
More recently, Deloitte also talked about CBDCs as disruptors, as they “introduce an electronic form of central bank money, adding significant complexity for commercial banks, and, possibly, implying a drastic change across the organisation to keep up with the need to innovate compatible products”.
Currently, more than 60 central banks are exploring CBDCs at varying levels of maturity. While 14% of central banks are moving forward to developments and pilot arrangements, three retail CBDC projects are currently live, these being Bahamas Sand Dollar, Bakong Cambodia and Eastern Caribbean DCash.