Top bank associations oppose US CBDC

The nation’s biggest banking associations are opposed to the creation of a U.S. Central Bank Digital Currency (CBDC). 

The Federal Reserve had been seeking comments on whether or not to pursue a US CBDC, though the central bank has said it would prefer a legislative mandate before going down that path. The comment period ended on Friday. 

The American Bankers Association, Independent Community Bankers of America and the Bank Policy Institute expressed concerns that a US CBDC would take much-needed deposits out of the banking system. 

The ABA noted in its comment letter that retail deposits comprise roughly 70% of all bank funding.

"As we have evaluated the likely impacts of issuing a CBDC, it has become clear that the purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute,” the ABA said. 

“A CBDC likely would undermine the commercial banking system in the United States, and severely constrict the availability of credit to the economy in a highly procyclical way,” especially “during a period of economic stress,” the Bank Policy Institute asserted in its letter.

The ICBA, in announcing its opposition, expressed a belief that a US CBDC could create issues around privacy and cybersecurity. 

“A U.S. CBDC appears to be a solution in search of a problem,” ICBA President and CEO Rebeca Romero Rainey said in a press release. 

"While ICBA supports the [Fed’s] efforts to ensure the U.S. payments and monetary system remains modern and competitive, a U.S. CBDC would introduce costs and risks far exceeding any benefits to consumers, small businesses and the broader economy,” Romero Rainey added.