U.S. central bank digital currency might pose 'significant risks': Fed's Bowman

The implementation of a U.S. central bank digital currency "could pose significant risks and tradeoffs for the financial system," Federal Reserve Governor Michelle Bowman said Tuesday at a Harvard Law School event in Washington. Throwing cold water on a central bank-issued digital U.S. dollar, Bowman said she has yet to see a compelling argument that a CBDC could address frictions within the payment system better than alternatives, such as the recently launched FedNow instant payment system. "FedNow, and a similar private sector service, is designed to help make everyday payments faster and more convenient, allowing consumers to instantly receive funds with same-day access, and enabling small businesses to more efficiently manage cash flows without processing delays," Bowman said in prepared remarks. "Future innovations may further build upon these services to more effectively address payment systems frictions and financial inclusion." The Fed, nonetheless, has been assessing the ups and downs of introducing a CBDC in recent years. A launch won't happen, though, without Congress giving the green light, as Fed Chair Jerome Powell has said. Bowman also sounded the alarm on stablecoins, a token whose value is pegged to a steady asset like the U.S. dollar, arguing "they could pose risks to consumers and the U.S. banking system." "Stablecoins purport to have convertibility one-for-one with the dollar, but in practice have been less secure, less stable, and less regulated than traditional forms of money," she said . More on CBDCs and Stablecoins There's 'nothing revolutionary' about a central bank digital currency: Fed's Waller PayPal makes bold move into stablecoin payments as adoption headwinds loom: BofA Russia to pilot digital ruble with 13 banks