Today, the House Financial Services Committee is holding a hearing with Federal Reserve (Fed) Vice Chair Lael Brainard to discuss a potential U.S. Central Bank Digital Currency (CBDC). Prior to today’s hearing, all Committee Republicans sent a letter to Fed Chair Jerome Powell reiterating their principles to guide the discussion surrounding a potential U.S. CBDC, as well as outline their concerns with the potential risks to commercial banks, the existing payments system, and consumers.
Watch Ranking Member Patrick McHenry’s (NC-10) opening remarks here.
Read Ranking Member McHenry’s opening remarks as prepared for delivery:
“Thank you, Madam Chair.
“Vice Chair Brainard, thank you for being here today as we seek to understand what problems a Fed-issued digital currency would solve.
“Despite this being our third hearing on digital assets and the Fed finally issuing its report, we still have many unanswered questions.
“But we knew this would happen.
“That is why, prior to the report’s release, my Republican colleagues and I developed a set of principles to guide our evaluation of a U.S. Central Bank Digital Currency, or CBDC.
“For more than a year, we have been exploring the potential impact of a CBDC on monetary policy. We’ve been trying to understand the impact on the Fed’s dual mandate and the implications for our banking system. Most importantly, we’ve been reviewing the Federal Reserve’s current authority, if any, to issue a digital currency.
“Our principles provided us a coherent framework to evaluate the Fed’s report.
“In its report, the Fed listed a number of potential benefits of a CBDC—most of which, in my opinion, could also be realized through private sector alternatives.
“There seems to be a disconnect about how innovation happens—which is outside the walls of government bureaucracy.
“We also don’t know the impact a digital currency will have on the Fed’s ability to effectively perform its monetary and regulatory functions.
“And no one has made a compelling case on why we should expand the Fed’s mandate into retail banking or how a Fed-issued CBDC won’t politicize the Fed.
“I understand that this issue is in the exploratory stage.
“However, there is potential for significant harm to our financial system if we move forward without sorting through potential consequences.
“That is why last week Committee Republicans sent a letter to Chair Powell outlining exactly where the Federal Reserve should focus its next steps.
“Chair Powell has been outspoken in his view, stating ‘it’s more important to get it right [which] means that we not only look at the potential benefits of a CBDC, but also the potential risks, and recognize the important trade-offs that have to be thought through carefully.’
“I strongly agree with the Chair’s assessment.
“Chair Powell and the discussion paper emphasized, the ‘Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.’
“Since the job rests with Congress to make this decision, we should be thorough in our review.
“Congress should not rush to issue a digital currency.
“Nor should the Fed.
“We both should understand whether the benefits of a digital currency actually outweigh the risks before any further congressional action is considered.
“I yield back.”