CBDC Proponents Have Failed to Make Their Case

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I have long advocated against any move to a central bank digital currency (CBDC). You can read more on that here. Recently, at the Cato Institute, Nicholas Anthony explained that advocates for CBDCs have failed to make their case. He writes:

When the market can’t deliver, products fail. When governments can’t deliver, products are forced upon people. So, to the extent governments intervene, it should be because there is a clear and substantial market failure that only the government is able to address.

The lack of a fundamental justification for governments to issue CBDCs can be seen elsewhere in the speech as well. [International Monetary Fund managing director Kristalina] Georgieva said, “In some countries the case seems dim today, but even they should remain open to potentially deploy CBDCs tomorrow.” Perhaps referring to the numerous government officials from around the world who have said CBDCs do not offer any benefits, she explained that CBDCs should be pursued because they might become useful if conditions change in the future—an argument reminiscent of what former Federal Reserve vice chair for supervision Lael Brainard told Congress.

In other words, there are no market failures to justify the intervention and there are no unique benefits to generate adoption, but that might change in the future.

Georgieva concluded her speech by saying, “We will be in the high seas for some time. But the potential payoff is clear—a more inclusive international financial system that meets our future needs.” That payoff is far from clear. What is clear, however, is that CBDC proponents have failed to make their case and that people are beginning to recognize the risks of CBDCs.

So let me conclude by simply saying that central bank digital currency is one idea that is probably best left out at sea. Rather than let themselves be weighed down by a bad idea, policymakers shouldn’t be afraid to swim away.

Read more here.