Consider privacy in potential retail CBDC – Treasury official.

A United States Treasury official has stated that privacy and the ability to transact anonymously should be considered in the design of a digital dollar. The official, Graham Steele, who is the Assistant Secretary for Financial Institutions at the Treasury Department, spoke at a payments-focused conference in Texas on June 13 about the Federal Reserve’s FedNow system and central bank digital currencies (CBDCs). He discussed the challenge of minimizing illegal transactions while maintaining user privacy with the use of retail CBDCs. Steele suggested that consideration should be given to how to protect user anonymity. He weighed the benefits and risks of a possible CBDC, saying it could promote a competitive payment environment. However, he cautioned that a retail CBDC would be directly backed by the Fed and could provide a safer option for consumers during bank runs, which could destabilize private sector lending. Steele added that the US has not yet determined whether it will pursue a CBDC, but a Treasury-led group is evaluating the implications of one. The evaluation includes looking over policy objectives related to global financial leadership, national security, and privacy, illicit finance, and financial inclusion. Steele also spoke about the Fed’s FedNow instant payments system, saying that having multiple options for payment operations promotes choice and competition in payments, which he believes will encourage the development of new payment services and features, along with enhancing payments system resilience. However, the FedNow system has witnessed political pushback, with some individuals claiming it would pave the way for a CBDC, which they believe would hand the government too much control. In April, Federal Reserve Board Governor Michelle Bowman expressed skepticism about the justification for CBDCs beyond use in interbank and wholesale transactions.

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