Fed Vice Chair Quarles casts significant doubt on establishing a digital dollar

With the Federal Reserve set to release a much- anticipated report this summer on the potential creation of a digital dollar, the central bank’s vice chair for supervision said Monday that he has significant doubts about the idea. Fed Governor Randal Quarles expressed skepticism about most arguments made in favor of a central bank digital currency. “The potential benefits of a Federal Reserve CBDC are unclear,” Quarles said in prepared remarks to the Utah Bankers Association. “Conversely, a Federal Reserve CBDC could pose significant and concrete risks.”

Among the downsides he cited are the challenges if the public could bypass traditional banks and go straight to the Fed for digital money. Along the same lines, he said the benefits that consumers get through bank competition might be diminished if the Fed stepped further into the space.

Also, he worried about the potential for cyberattacks on a system whose security would be difficult to design. Proponents of a Fed- issued digital dollar say it could speed up payments systems, particularly internationally. They also cite the benefits for the unbanked or underbanked who don’t have access to the existing digital payments system.

Richmond Fed President Thomas Barkin also expressed doubt about the digital dollar. “We already have a digital currency in this country, it’s called the dollar,” Barkin said in Atlanta. “So if you’re gonna enhance the digital currency, you have to decide for what reason ... I still haven’t heard a good story about what we’re trying to accomplish.”