At a hearing entitled “The Digitization of Money and Payments,” the Senate Committee on Banking, Housing and Urban Affairs considered testimony on the development and testing of a U.S. central bank digital currency (“CBDC”) pilot program.

Testimonies

Former CFTC Chair J. Christopher Giancarlo testified that during his tenure at the CFTC, he was struck by (i) the deterioration of America’s aging financial infrastructure, like that of its physical infrastructure, (ii) the coming of the second Internet wave, the “Internet of Value,” in which the world is transitioning to managing commodities through the Internet, and (iii) the opportunity that CBDC offers to enhance financial inclusion and efficiency. Mr. Giancarlo outlined the benefits of distributed ledger technology (“DLT”), including enhanced security against manipulation, and advised the Federal Reserve and Treasury to take action toward creating U.S. CBDC pilot programs.

Paxos CEO and Co-Founder Charles Cascarilla emphasized the ability of stablecoins to (i) increase financial inclusion for unbanked and underbanked Americans, (ii) mobilize capital and reduce transaction costs, and (iii) increase transparency and reduce systemic risk associated with centralized intermediaries. Mr. Cascarilla highlighted (i) the security that DLT offers counterparties to a transaction, (ii) the protections that regulatory oversight by the New York State Department of Financial Services provides to Paxos’ clients and (iii) the mix of privacy and accountability that stablecoin creations, transactions and redemptions provide.

Duke University School of Law Visiting Professor Nakita Q. Cuttino identified public access to existing payments systems, including credit and debit systems and wire and ACH payments, as the “simplest near-term solution” to issues of financial inclusion for low-income Americans. Ms. Cuttino cautioned against the quick adoption of a U.S. CBDC, urging Congress to first address questions regarding (i) whether a U.S. CBDC would increase access to the financial system, (ii) what use cases may exist for rural and low-income communities, (iii) what potential barriers to availability exist, and (iv) whether a FinTech solution would merely move Americans from the “fringe financial marketplace” of check cashers and payday lenders to a “fringe digital economy.”

Commentary

Would the development of a federally backed and regulated digital dollar cause a huge inflow of foreign money into the U.S. dollar, as the world’s ultimate safe asset? If so, this has tremendous significance for every national economy.

Primary Sources

  1. U.S. Senate Committee on Banking, Housing and Urban Affairs: Full Committee Hearing – The Digitization of Money and Payments
  2. Congressional Testimony, Christopher Giancarlo: “The Digitization of Money and Payments”
  3. Congressional Testimony, Charles Cascarilla: “The Digitization of Money and Payments”
  4. Congressional Testimony, Nakita Q. Cuttino: “The Digitization of Money and Payments”

At a hearing entitled “The Digitization of Money and Payments,” the Senate Committee on Banking, Housing and Urban Affairs considered testimony on the development and testing of a U.S. central bank digital currency (“CBDC”) pilot program.