In a recent address at the Atlantic Council, Federal Reserve Governor Christopher Waller shared his insights on the evolving landscape of digital currencies, stablecoins, and central bank digital currencies (CBDCs). He emphasized that the United States already possesses a highly efficient payment system, reducing the immediate need for a CBDC. Instead, Waller pointed to the growing role of stablecoins and digital assets issued by commercial banks—provided that appropriate regulatory frameworks are established.
The Case for CBDCs: Unclear Benefits for the U.S.
While over 130 countries are currently exploring CBDCs—with nearly 60 already in advanced pilot stages—the United States remains cautious. Waller noted that the existing payment infrastructure in the U.S. is robust and reliable, raising questions about what specific problems a CBDC would solve.
Waller challenged proponents, asking, “What issue does a CBDC actually address? So far, no one has provided a compelling answer.” He highlighted that the Federal Reserve has traditionally handled back-end settlement while letting private banks manage consumer-facing operations. Introducing a CBDC would fundamentally shift this dynamic, requiring the central bank to engage directly with the public—a move that could disrupt long-standing financial practices.
He also critiqued the promotional tactics used by some advocates, comparing them to “television infomercials that emphasize flashy features without clearly explaining the core need.”
Global CBDC Developments and the U.S. Dollar’s Standing
Despite active CBDC development in the European Union, the United Kingdom, and Japan, Waller expressed confidence that these initiatives would not undermine the U.S. dollar’s role as the world’s primary reserve currency.
He explained that most proposed CBDCs are essentially digital versions of existing bank deposits. The dollar’s dominance, according to Waller, is not based on technological superiority but on the strength of the U.S. economy, its deep capital markets, and a stable legal system. International trade and finance, he argued, will continue to rely on the dollar regardless of other countries’ digital currency projects.
China’s Digital Yuan and International Ambitions
China has been particularly proactive with its digital yuan (e-CNY) and is participating in cross-border payment projects like mBridge. Still, Waller downplayed the potential impact on the dollar’s global status.
“If certain countries prefer to transact primarily within Asian markets and avoid trade with the U.S. or Europe, they might adopt the digital yuan,” Waller stated. “But engaging with the global economy will still require the use of the U.S. dollar.”
He stressed that the dollar’s appeal is rooted in the country’s advanced financial infrastructure—including liquid markets, transparent regulations, and extensive banking networks—not merely its digital form.
Stablecoins as an Emerging Payment Option
Waller acknowledged that stablecoins could play a significant role in the future of payments. Consumers may soon choose between traditional bank transfers and stablecoin-based wallets, much like they select between credit cards and mobile payment apps today.
At the same time, he recognized that physical cash remains important. “I haven’t used cash in over a year and a half,” Waller noted, “yet global demand for U.S. banknotes continues to grow by 6–7% annually.” Cash, he added, serves as a reliable store of value and is unlikely to disappear entirely in the coming decades.
The Dollar’s enduring Role in Global Trade
Addressing concerns about “de-dollarization,” Waller remained skeptical. “No one is forced to use the dollar—they choose to,” he said. He cited an example: when a Japanese company trades with a German firm, they often settle in dollars due to the currency’s liquidity and the efficiency of the U.S. payment system.
Still, Waller cautioned against complacency. Maintaining the dollar’s advantage will require ongoing investment in financial infrastructure to ensure speed, security, and reliability.
Looking Ahead: Regulation Over Disruption
Waller’s overarching message was clear: the U.S. does not need to rush into launching a CBDC. Instead, policymakers should focus on enhancing regulations and supporting technological innovation.
Key takeaways from his address include:
- Stablecoins could become a viable payment alternative, provided they are well-regulated.
- There is no urgent need for a CBDC in the United States.
- Digital currencies issued by other nations are unlikely to threaten the dollar’s global role.
- The dollar’s strength derives from institutional trust and economic stability—not just technical features.
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Frequently Asked Questions
What is a CBDC?
A central bank digital currency (CBDC) is a digital form of a country's official currency, issued and regulated by the central bank. It aims to provide a secure, government-backed alternative to physical cash and private digital currencies.
How do stablecoins differ from CBDCs?
Stablecoins are typically issued by private entities and are pegged to stable assets like the U.S. dollar. CBDCs, on the other hand, are directly backed and controlled by a central bank, offering a higher degree of regulatory oversight and stability.
Why is the U.S. hesitant to adopt a CBDC?
U.S. officials argue that the current payment system is already efficient and that introducing a CBDC could disrupt the existing division of responsibilities between central banks and commercial financial institutions.
Can other countries’ CBDCs challenge the U.S. dollar?
It's unlikely. The dollar’s dominance is supported by the size of the U.S. economy, deep capital markets, and geopolitical stability—not just the format of the currency.
Are stablecoins safe to use?
While stablecoins offer innovation and convenience, their safety depends on proper regulation, transparent reserves, and robust oversight. Users should stay informed about regulatory developments.
Will cash become obsolete?
Not in the near future. Cash continues to serve as a trusted store of value and means of exchange, especially in situations where digital payments are impractical or unavailable.