The U.S. Federal Reserve should “lead the way” on a central bank digital currency (CBDC), said Sen. Sherrod Brown (D-Ohio).
The chairman of the Senate Committee on Banking, Housing and Urban Affairs endorsed the idea of a U.S. central bank–issued digital currency in a letter to Fed Chair Jerome Powell and Lael Brainard, who runs the Boston branch of the Fed.
“Some of our international counterparts are moving quickly to determine whether to implement a central bank digital currency,” Brown wrote, linking to a press release about a digital euro. “The United States must do the same. We cannot be left behind.”
Importantly, Brown specified the Fed should work both on token-based digital dollars as well as account-based efforts. Last year, he introduced a bill to the Senate Banking committee that would create a digitized version of the existing U.S. dollar and grant every U.S. resident financial access through so-called FedAccounts.
In this week’s letter, dated March 1 but shared on Friday, Brown suggested that a token-based dollar based on a blockchain could complement the FedAccount version.
“Both are intended to ensure that working families have the same access to the payments system as Wall Street banks and wealthy corporations,” he wrote. “The Federal Reserve’s recent publication outlining the goals for a central bank digital currency is a step in the right direction.”
He went further, writing that the Fed and the Treasury Department should “establish a concrete timetable in deciding whether to implement a CBDC.”
However, any digital dollar should address consumer protection, financial access, security and individual privacy concerns, he said.
He referenced private efforts, like the Facebook-initiated diem stablecoin project, warning that efforts by technology companies could exploit the very people they claim to want to help.
“The Fed must not stop at regulating a privately issued digital currency. It must go further and explore a publicly issued digital dollar,” Brown wrote.
The digital dollar debate exploded into the congressional scene last year, when various bills introduced in both the Senate and the U.S. House of Representatives sought to find more efficient ways of sending funds to U.S. residents.
None of these efforts went anywhere, but research by the U.S. central bank expanded last year. Brainard announced the Boston Fed was looking into a digital dollar through a joint research project with the MIT Digital Currency Initiative.
More recently, Consumer Financial Protection Bureau Director Nominee Rohit Chopra said the Fed should accelerate its efforts to build a modernized real-time payments system, though he didn’t specifically reference CBDCs.
In his letter, Brown warned that private efforts like bitcoin could undermine the dollar.
“The potential for non-sovereign crypto-assets, like bitcoin, to become more widely used as a payment mechanism, poses significant monetary policy and financial stability risks, including risk to our climate,” he wrote. “They are highly volatile and speculative, can be used for illegal activity, and consume incredible amounts of energy, driving up electricity use rates, and putting the resilience of local grids at risk.”