US Conservative Political Organization Makes the Case Against CBDCs, Praises Bitcoin and Private Stablecoins
A fiscally conservative think tank doubts that central bank digital currencies (CBDCs) would be beneficial and wonders if they might even bring about negative outcomes.
In a new policy brief, the Club for Growth questions several of the key arguments that have been put forth in favor of central banks issuing a government-backed cryptocurrency.
“CBDCs seem to be a solution in search of a problem. There is no obvious market failure that CBDCs correct.
The idea that CBDCs could help to bank the unbanked without crowding out the services of private commercial banks seems dubious.
The so-called improvements in monetary policy would consist of the ability of the central bank to circumvent the so-called zero lower bound on nominal interest rates, but it is not entirely clear that this is an actual constraint on monetary policy or that such a characteristic is desirable.”
Zero-bound is a term referring to when central banks are unable to stimulate an economy by cutting short-term interest rates which are already at or near zero.
The report adds that the prospect of CBDCs replacing cash altogether would strip citizens of their right to privacy as they conduct routine transactions.
“The possible elimination of physical currency would undoubtedly make people worse off relative to the status quo and is part of a bigger threat to privacy created by CBDCs.”
When it comes to CBDCs being touted as a solution for slow payment processing speeds, the Club for Growth says that “there is no way in which a CBDC provides an obvious, superior alternative” to other privately built centralized ledgers such as dollar-pegged stablecoins and Bitcoin (BTC).
The brief concludes by pointing out that while there are a number of challenges facing the current financial system, central bank digital currencies are not likely to offer the best range of solutions to consumers.
“Advocates argue that CBDCs would provide significant benefits in the form of greater financial inclusion, faster payment processing, greater flexibility for monetary policy, and reductions in tax evasion and illegal activity conducted using physical currency.
Even taking all of these objectives as given, there is little reason to think that a CBDC is the optimal policy solution to bring about these changes. Private solutions would undoubtedly provide a better means of making the payment system more efficient.
It is not obvious that monetary policy needs additional flexibility, and any benefits from eliminating physical currency must be balanced against the costs of digital surveillance and the loss of privacy.”
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