US Congress Hearing: Central Bank Digital Currency 'One of the Worst Financial Ideas'

The U.S. Congressional Subcommittee on Monetary Policy and Trade discussed major questions around digital currencies in a hearing today, July 18.

The hearing, entitled "The Future of Money: Digital Currency," considered potential domestic and global implementations of cryptocurrencies.

At the hearing, the Subcommittee discussed the deployment of cryptocurrency and its underlying technology, blockchain, by central banks, arguing whether central banks should introduce a central bank digital currency.

Addressing this point, Rodney Garratt, a professor of economics at the University of California, Santa Barbara, claimed that the banks have to decide whether they want "To withdraw completely from providing a payment device for general public," or whether they prefer to adopt one of sorts of digital alternative.

"I think we can we can safely predict that its credit allocation would unavoidably be highly politicized and the taxpayers would be on the hook for its credit losses. The risk would be directly in the central bank."

Pollock explained that if fiat money becomes digitized, its nature will not be changed, and will still be issued by a central bank.

While Pollock can envision some type of private digital currency backed by assets, he concluded that it will not be "Private fiat currency" like Bitcoin.

When Subcommittee chairman Andy Barr asked whether cryptocurrencies can function as a money substitute, Garratt claimed that "In terms of a conceptual idea" crypto is a currency "At some extent," but not a "Very good one" at the moment.

Subcommittee vice chairman Roger Williams asked the panel what the main impediments are to the adoption of crypto and blockchain, and what the U.S. Congress can do about them.

Congressman Brad Sherman, who has previously expressed a highly critical position toward cryptocurrencies, maintained his aggressive stance, stating that he would prefer that U.S. persons were banned outright from buying or mining cryptocurrencies.