Digital U.S. currency should complement cash, not replace it, experts tell lawmakers
Jun. 15, 2021 2:16 PM ETBy: Brian Stewart, SA News Editor6 Comments
- Speaking to a congressional committee weighing whether the U.S. should launch a digital version of its currency, a panel of experts on Tuesday supported the general idea, though they warned that such a system should not completely replace physical cash.
- The witnesses, appearing before the House Financial Services Committee, also warned that such a launch should guard against any possible privacy violations and should protect security through strict government supervision of the process.
- Carmelle Cadet, founder and CEO of cloud software company EMTECH, told lawmakers that the rollout of a central bank digital currency, or CBDC, would offer many benefits.
- This includes faster distribution of money to citizens, such as with the COVID stimulus checks. The move would also support the dollar's place as the key currency for cross-border payments and remittances, Cadet argued.
- "The physical paper provided by the central bank today can be gradually complemented with a more easily distributed digital version," she said, according to prepared remarks.
- Jenny Gesley, foreign law specialist at the Library of Congress, backed the idea of using a digital currency as a supplement for the current system. She argued against completely replacing cash, though, noting that some people would be left out of a system that relied entirely on digital currencies.
- "A CBDC that would replace cash could have negative effects for financial inclusion," she said.
- At the same time, Gesley pointed out that the addition of a digital currency could prove helpful for people who don't have access to traditional banking services. She noted that this represented one of the goals cited by the Central Bank of The Bahamas when it launched its Sand Dollar digital currency last year.
- Another witness, Rohan Grey, assistant professor of law at Willamette University, agreed that the best use of a digital currency was as an add-on to the current cash system.
- "Token and account-based monies are complements, not substitutes," he said. "They provide different functionality, safeguards, and resiliencies, and should be developed in a parallel, coordinated manner rather than treated as competing alternatives."
- Grey also urged lawmakers to protect privacy once a digital currency is in place.
- "The right to transactional privacy and anonymity is a bedrock of political freedom and democracy, and should not be abandoned as we transition to a permanently digitally connected society," he argued.
- Grey also pushed Congress to include other governmental and semi-governmental agencies in the process along with the Federal Reserve. Specifically, Grey called for the inclusion of the Treasury Department and the Postal Service in the operation of a digital currency.
- Privacy wasn't the only concern raised during the hearing. Witnesses also pushed for safeguards related to security.
- Neha Narula, director of the Digital Currency Initiative at the MIT Media Lab, warned that the government needed to stay away from third-party vendors in creating its digital.
- "The government’s typical way of building systems - outsourcing to a third-party vendor - will not, in my opinion, work here," she said. "The US cannot outsource monetary policy to a vendor."
- Instead, Narula called for continued collaboration between government and academics to develop the underlying technology.