Karen Petrou: CBDC’s Big Empty
Anyone looking for even a scintilla of a clue buried in a hint of an intention in the Fed’s CBDC discussion draft hunted in vain for guidance on the most consequential strategic inflection point for the U.S. financial-services industry, the financial system, the global payment system, and even the future of money. Once, we all would have had to wait for augers from the on-high Fed to see the fate the imperium decreed. Now, the Fed still thinks it rules all it surveys even though it doesn’t. Soon, it may find out the hard way that fast-moving companies crafting digital money care as little for the central bank’s wishes as they did for those of the media, hotel, and retailing magnates they have already supplanted.
This is not to say that we must necessarily have a central-bank digital currency. As I noted in my book, a democracy must ensure privacy and competition in ways China, for one example, disregards. Rather, it’s to say that the U.S. will not have a secure store of value or sound medium of exchange without a payment system on which the economy stands firm. Payment-system finality, accessibility, ubiquity, and cyber-security are all at risk if the Fed cedes the CBDC field without first and fast establishing the new framework it knows we need.
Nor am I saying that CBDC is inevitable because stablecoins are a certainty. Libra’s ignominious demise is ample evidence of the power regulators still have to set the terms of payment …