The Fed official said the US central bank should study the pros and cons of potentially creating an official digital currency, a process the Fed is undertaking now. But he said any proposal to create a US central bank digital currency, or CBDC, must clear a “high bar.”
“Before we get carried away with the novelty, I think we need to subject the promises of a CBDC to a careful critical analysis,” Quarles said in remarks prepared for the annual Utah Bankers Association Convention. “I will especially have to be convinced that the potential benefits of developing a Federal Reserve CBDC outweigh the potential risks.”
Quarles said the US dollar is already “highly digitized” and expressed skepticism that a CBDC would help to improve financial inclusion or lower financial costs. Some of those issues may be better addressed with other solutions, such as broader access to low-cost banking accounts.
A CBDC issued by the Fed could also hinder financial innovation in the private sector and pose a threat to the banking system, which relies on deposits to issue loans, he said.
The Fed will release a discussion paper this summer about the benefits and costs of a CBDC and the Boston regional arm of the Fed is doing research with the Massachusetts Institute of Technology on the technology that could be used for a digital currency.
