Treasury Assistant Secretary Describes CBDC Policy Considerations

At a conference on digitization of financial services, Treasury Assistant Secretary for Financial Institutions Graham Steele highlighted the benefits and risks being considered as the government continues to explore a central bank digital currency (CBDC) as an option for upgrading money and payments infrastructure.

At the Transform Payments USA conference in Austin, Texas, Mr. Steele reported that an interagency group led by Treasury is "evaluating policy objectives related to global financial leadership, national security, and privacy, illicit finance and financial inclusion," and trying to "strik[e] the right balance between these priorities." He said that realizing potential benefits while minimizing risks will depend on the design of both policy and technology.

He said that a retail CBDC could (i) contribute to a more competitive and innovative payment system; (ii) support financial inclusion; and (iii) help preserve the face value redemption of the currency. However, he warned that CBDCs present challenges, including the possibility of "bank runs" that could destabilize private sector lending; protecting user privacy while minimizing risks of illicit financial transactions, and ensuring offline capabilities for users with limited or no internet capability.