The Biden administration’s new executive order on cryptocurrency has raised concerns among banking trade groups that the U.S. could create its own digital currency.
Rob Nichols, president and CEO of the American Bankers Association, said in a statement yesterday that the trade group was concerned that the order directs federal agencies to pursue a central bank digital currency before the government has determined whether the U.S. would benefit from a digital currency.
“While much of the executive order calls on federal agencies to assess the expanding marketplace of digital assets before recommending new rules, we are concerned that it clearly directs federal agencies to begin pursuing a central bank digital currency even before determining if a U.S. CBDC is actually ‘in the national interest’ as the order also requires,” Nichols said in the statement. “We urge the administration and the agencies involved to carefully consider the implications of a U.S. CBDC, which could fundamentally reshape our banking and payments system to the detriment of bank customers and their communities.”
The executive order on digital assets signed yesterday by President Joe Biden calls on federal agencies to research various aspects of cryptocurrencies and other digital assets, including their impacts on national security, financial stability, and access to safe and affordable financial products.
Nichols in his statement said the ABA shares the Biden administration’s interest in “responsible financial innovation.”
“Ensuring that consumers, investors and businesses are protected from the potential financial risks posed by digital assets should be a priority for the government, and we believe that can only be achieved through careful coordination with the private sector, including the banking industry,” Nichols said.
The Federal Reserve is currently working on research into a possible central bank digital currency. Nichols said the Federal Reserve’s review is the right venue to discuss a central bank digital currency, allowing all stakeholders an opportunity to evaluate “any unintended consequences of a CBDC before legislation is introduced that could shape it.”
“To date, we have yet to see evidence that a U.S. CBDC solves any existing problems or improves on our constantly evolving financial system that remains the envy of the world,” Nichols said.
Rebeca Romero Rainey, president and CEO of the Independent Community Bankers of America, said in a statement that the trade group is reviewing the executive order and its effects on community banks. She noted that the ICBA supports the administration’s comprehensive and coordinated approach to digital assets.
“Harmonizing digital asset regulations will ensure consistent oversight of cryptocurrency service providers, establish clear guidelines for permissible bank activities, and avoid gaps to minimize the risk of regulatory arbitrage,” Romero Rainey said. “Unregulated cryptocurrency would disintermediate community banks – undermining their ability to support local customers and communities – while threatening consumer privacy and protections as well as financial stability.”
Romero Rainey also listed several policy issues supported by the ICBA, including ensuring that the introduction of a U.S. central bank digital currency has clear objectives, would not harm the financial system and has a solid legal framework.
