The Credit Union National Association (CUNA) offered feedback on the Federal Reserve’s recent paper on creating a central bank digital currency (CBDC).
The Fed issued a request for comment (RFC) on its paper called “Money and Payments: The U.S. Dollar in the Age of Digital Transformation.”
CUNA officials believe a more refined outline of a potential CBDC is necessary with a focus on the issues the currency intends to solve.
“We recognize this RFC is intended as an initial step in this process; we envision the conversation to be an iterative and extended process–one in which we are enthusiastic about participating. We have concerns, however, that under several scenarios, the creation of a CBDC could significantly worsen the provision of financial services,” CUNA officials wrote in response to the RFC. “We want to continue having this conversation and to work collaboratively to identify ways credit unions can address the problems described in the RFC, whether through existing tools or through newly created financial instruments.”
CUNA cited several scenarios that could significantly worsen the operating environment for credit unions. For example, a retail CBDC could result in deposit substitution that would negatively affect lending and investments while reducing credit supply, increasing the cost of credit, and causing an economic slowdown.
CUNA officials added that a CBDC — defined as “a digital liability of a central bank that is widely available to the general public” — deserves “serious and exacting consideration,” and Congress should authorize its implementation.
“While there are no doubt opportunities for improvement, we believe most, if not all, can be addressed by innovations in the current financial services framework and through continued public-private partnerships, without the introduction of a novel digital currency that could destabilize the system,” CUNA leadership added in its feedback.