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Credit unions warn of the downsides of CBDCs

 


An American lobby group has now spoken out against the USA introducing its own central bank digital currency (CBDC). The National Association of Federally-Insured Credit Unions (NAFCU), i.e. the association of credit unions, argues that the disadvantages of such a digital currency would outweigh the "hypothetical advantages".


As the lobby group wrote in an open letter to the US Department of Commerce this week , on the one hand the disadvantages would outweigh the possible advantages and on the other hand there would be better alternatives to achieve the desired goals. The letter came as part of the public feedback period that the ministry is running on its handling of digital currencies.


While the letter is not publicly available in its entirety, NAFCU's statement reveals that it referred to existing payment systems that could achieve similar improvements for online payments without having the same destructive potential as the targeted digital currency. The cooperative banks in particular could already serve the purpose of ensuring more financial inclusion, there is no need for a CBDC.


The last point is not surprising, because the lobby group represents cooperative banks and sees direct competition for its own clientele in a central bank digital currency.


However, the letter also includes several constructive suggestions on how the global competitiveness of the US could be improved even without CBDC. Among other things, there is a need for “support for responsible innovation” within the banking system and an expansion of investor protection when dealing with digital currencies.


NAFCU previously sent a similar letter to the US Federal Reserve in May, stating that administering a CBDC “would distract from the Federal Reserve’s two primary responsibilities, which are to minimize inflation and minimize unemployment.”

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