President of the Minneapolis Federal Reserve Bank, Neel Kashkari, participated in a fireside chat at the Minnesota Transportation Conference and Expo on May 15. While he spoke mostly about topics unrelated to cryptocurrency and blockchain, he gave a blunt assessment of central bank digital currencies (CBDCs) during the Q&A after his presentation.
“We’re studying it,” Kashkari said of CBDCs, adding that the Fed believes it would take an act of Congress to allow it to issue its own digital currency:
“Whether it’s Bitcoin or digital currency, nobody has been able to articulate what problem it is actually solving. […] I can send anybody in this room $5 right now using Venmo. […] So what is it that a central bank digital currency can do that Venmo can’t do?”
“It’s just a bunch of handwaving word salad about maybe it’s better. […] But there’s no evidence that it is better,” he continued.
Kashkari asked rhetorically why China may have been motivated to introduce its CBDC and answered, “In theory, a government could monitor every one of your transactions with a central bank digital currency.” He said, however:
“We would not be in favor of that at the Federal Reserve.”
Kashkari had more drawbacks to suggest. The government could impose negative interest on an account. “You can’t do that at Venmo and we don’t want to do that at the Federal Reserve,” he said. A CBDC would also facilitate direct taxation of an account, he added.
“I share a lot of your privacy concerns,” Kashkari said, addressing the person who asked the question. “We have no interest in violating the American people’s privacies at the Federal Reserve.”
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“I’ve developed a deep skepticism at this point,” Kashkari said. “But I’m going to keep my mind open and see what the studies come up with.”
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