Treasury Secretary Yellen still cant decide on digital dollar
Treasury Secretary of the US, Janet Yellen, has said that she still is not sure whether the US should go ahead and have the digital dollar and follow the example of other major countries including China and India in introducing the same.
This comes against the backdrop of an increasing clamor among various countries, big and small, to ride on the CBDC bandwagon and we have been getting reports of many such experiments and pilots happening for the same.
The Need to Study the Risks
While some countries like Nigeria have gone ahead and created CBDCs for use by the public, others are in various phases of testing but by the looks of it, the US does not seem to be yet sure on whether it wants to introduce a digital dollar yet. There are some pretty long-term effects of a digital dollar and with the US dollar being the center of business for many parts of the world, the US has to think through a lot of items and their overall effect before it can choose to introduce a digital dollar.
“This is a decision that’s important and needs to command consensus. There are some benefits, but there are also meaningful costs,” Yellen said. “It can work to disintermediate the banking system. And, you know, we need to work through the pros and cons. I don’t have a view yet.”
Need for a Consensus
Internally, this decision would also need a consensus between the SEC, Congress as well as the Treasury and it is indeed going to be key to find out where the digital dollar would fit into the overall scheme of things and how likely it would be to affect the existing financial ecosystem. So far, there has been varied opinion within the US on whether it needs a digital dollar or not. On the one hand, there is the fear that it would be left behind in the growth of fintech if it chooses not to adopt a digital dollar while other countries go ahead with their CBDCs.
On the other hand, there is a need to be careful to ensure that the existing system is not disturbed which could turn out to be very risky in the future. This is probably the major risk that the regulators are also looking into and the more important the fiat currency is, the higher the risk that it is likely to be and hence the more careful that the regulators need to be.