Fed’s Kashkari: CBDCs Are Not Worth the Risk

President of the Minneapolis Federal Reserve Bank, Neel Kashkari, gave a blunt assessment of central bank digital currencies (CBDCs) during a fireside chat at the Minnesota Transportation Conference and Expo on May 15.

“We’re studying it,” Kashkari said of CBDCs, adding that the Fed believes it would take an act of Congress to allow it to issue its own digital currency.

“Whether it’s Bitcoin or digital currency, nobody has been able to articulate what problem it is actually solving,” Kashkari said. “I can send anybody in this room $5 right now using Venmo. So what is it that a central bank digital currency can do that Venmo can’t do?”

Kashkari argued that CBDCs are not worth the risk. He pointed out that a government could monitor every one of your transactions with a CBDC. He also said that the government could impose negative interest on an account or directly tax an account.

“I share a lot of your privacy concerns,” Kashkari said. “We have no interest in violating the American people’s privacies at the Federal Reserve.”

Kashkari’s comments come as several countries, including China, are exploring the possibility of issuing CBDCs. However, Kashkari’s comments suggest that the United States is not yet ready to move forward with a CBDC.

Here are some additional details from Kashkari’s comments:

Privacy: Kashkari expressed concern that a CBDC would allow the government to track every transaction. He said that this would be a “major privacy violation.”

Negative interest rates: Kashkari said that a CBDC could be used to impose negative interest rates. This would mean that people would have to pay the government to hold their money in a CBDC account.

Direct taxation: Kashkari said that a CBDC could be used to directly tax people’s accounts. This would be a more efficient way for the government to collect taxes, but it would also give the government more control over people’s money.

Overall, Kashkari’s comments suggest that the Federal Reserve is not yet convinced that CBDCs are worth the risks.

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