In a Thursday Senate confirmation hearing, President-elect Donald Trump’s Treasury Secretary nominee, Scott Bessent, dismissed the idea of a U.S. central bank digital currency (CBDC), easing the concerns some crypto observers have held for a long time.
The U.S. is still in the search phase for CBDCs and hasn’t officially decided whether it wants to issue or even test one. Scott Bessent’s current remarks against CBDCs made it unlikely for the U.S. to push for a CBDC during Trump’s term.
Scott Bessent disapproves the need for U.S. CBDC
“I see no reason for the U.S. to have a central bank digital currency.”
-Scott Bessent, Trump’s Treasury Secretary nominee.
Scott Bessent said at the Senate Finance Committee that a central bank digital currency is for countries lacking other investment alternatives.
However, Bessent’s statements differ from the current trend of various federal agencies investigating the feasibility of a central bank digital dollar.
If Bessent is confirmed as Treasury Secretary on January 20, the federal government’s CBDC research initiatives can be turned around.
Bessent is not alone in his criticism of CBDC
Bessent’s statements at Trump’s Senate confirmation hearing are consistent with Trump’s vow a year ago that upon reelection, he would “never allow” a U.S. CBDC. Trump nominated Bessent in November 2023. Bessent is not alone in opposing central bank digital currencies; it also aligns with the broader criticism of many Republicans.
Last May, the House approved the Anti-Surveillance State Act that would bar Federal Reserve banks from directly or indirectly issuing digital currencies.
A central bank digital currency is a digital version of a country’s official currency. The U.S. has explored digital currencies for years. There are two main types of CBDCs: retail CBDCs targeted at normal consumers and wholesale versions between different financial institutions.
According to Atlantic Council data, 134 countries, encompassing 98% of global GDP, are looking into central bank digital currencies. China has already tried out its digital yuan, testing during the 2022 Beijing Olympics.
President Biden had issued an executive order in March 2022 for the “responsible development” of digital assets. Biden cited that other global monetary authorities were “exploring, and in some cases introducing” CBDCs. The order highlighted the need for the U.S. to reinforce its leadership in the global financial system and in technological and economic competitiveness, through the development of payment innovations and digital assets.
Janet Yellen, the current Treasury Secretary and former chair of the Federal Reserve, also supported the idea of exploring CBDCs. The Federal Reserve acknowledged CBDCs in March last year as a “key duty” to Congress.
Fed vice chair, Lael Brainard, was among those who touted the idea of the Fed pursuing a CBDC. Brainard maintained that CBDC could be used as a tool for reinforcing global dominance, and “safe central bank liability in the digital financial ecosystem.”
Tom Emmer was among the congressmen who opposed the idea of a U.S. CBDC, after he repeatedly introduced legislation to ban their issuance entirely. Together with his party members, including Sen. Ted Cruz (R-TX) and Florida Governor Ron DeSantis, Emmer argued that CBDCs were China-style tools for financial surveillance and control.
Fed Chair, Jerome Powell, spoke to the Senate Banking Committee last year and confirmed that the central bank would only issue a CBDC with Congressional approval.
The CBDC Anti Surveillance Act also highlighted that if the CBDC bill was ever to become law, the U.S. would be the only country to have banned CBDC. The report also suggested that it would be a self-defeating move in the race for the future of money and would make U.S. sanctions less effective. The bill disclosed that rejecting a CBDC would undercut the country’s national security role of the dollar because CBDCs would accelerate other countries’ development of alternative payment systems.
Other countries are also distancing themselves from CBDCs, including Australia which highlighted last year that there were no strong cases for a retail CBDC. The country argued that other countries that have introduced or considered CBDCs were motivated by factors that don’t apply strongly in Australia. But the nation’s RBA and Treasury revealed they were open to revisit CBDC as more is learned about the benefits and costs, both globally and domestically.
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