The Big Difference Between a Digital Dollar and a CBDC
Joe Weisenthal, 15 June 2021
Outside of perhaps China, right now the big use case for central bank digital currencies (CBDCs) seems to be just talking about them. Crypto is cool right now and people are interested in digital money, so government and central bank officials are also spending a lot of time talking about their visions of how fiat currencies could be brought into this new realm.
However, there’s still a lot of ambiguity about how, say, a digital dollar would be designed, or what exactly it would accomplish. We’re still at the talking stage.
A big hearing happening today in D.C. is called “Digitizing the Dollar: Investigating the Technological Infrastructure, Privacy, and Financial Inclusion Implications of Central Bank Digital Currencies.”
To this end, you should definitely read the introductory remarks from Rohan Grey, a professor at Willamette University College of Law. Rohan is a longtime advocate of the government establishing a digital dollar, but with a specific vision in mind. Here are a few key parts of his testimony:
I am afraid I must begin my substantive remarks with a quibble, albeit a gentle and mostly provocative one. In particular, my complaint is with the use of the term “central bank digital currency” in the title of this hearing. In my view, it is a mistake to equate and reduce the idea of a “digital dollar” to that of a “central bank digital currency.” The former encompasses a wide spectrum of designs, architectures, and arrangements, while the latter refers only to a narrow segment of that spectrum in which central banks are the exclusive issuers and administrators. To be clear, I believe the Federal Reserve should and will play a central role in any future digital dollar regime introduced in the United States. I also strongly endorse the FedAccounts proposal of my co-panelist Professor Menand and his colleagues. But in my view, the universe of digital fiat currency possibilities that we should be exploring at this stage extends beyond that which the vocabulary of CBDCs allows us to consider.
