Fed Governor Bowman doubles down on CBDC skepticism, dislikes stablecoin

Federal Reserve Board Governor Michelle Bowman shared her thoughts on financial innovation in a speech at Harvard Law School on October 17.

Bowman spoke extensively about Central Bank Digital Currency (CBCC) and stablecoins. She also promoted “consolidated ledger” technology and general ledger technology as a bridge between existing systems as well as ways to improve existing technology. She repeated her previous question on the importance of such innovations and suggested that banks should play their part in preventing government corruption.

“The U.S. centralized banking model helps protect consumers' financial activities from unnecessary government interference, and I believe this is an ideal model for future financial innovations.

Bowman, a Republican, is echoing concerns being heard among politicians, from congressmen to governors, even though banks haven't spelled out exactly how to prevent overdrafts.

She said the CBCC could lead to a break-up of the bank if not “properly” designed. Moreover, the financial system has faced issues such as “inconsistencies in the payment system, promoting financial inclusion and providing public access to safe central bank money”, but has not seen a compelling argument for the superiority of CBCC over other alternatives.

In particular, Bowman saw no benefit to CBCCs from the FedNow service introduced in July. The Fed has stated that it will not issue US dollar CBDCs without an order from Congress.

Related: US Federal Reserve banks say stable coin ‘could be source of financial instability'

Bowman reiterated her call for a regulatory framework for financial innovation based on the principle of equal regulation for similar risks. The low level of stable coin control was her main argument against their use.

Governor Bowman's speech on responsible finance and payment innovation: https://t.co/gkYjDmRVYO

— Federal Reserve (@federalreserve) October 17, 2023

Bowman said some of the inconsistencies in the payment system are by design. “Perceived payment limitations are not always due to technological problems, but also to existing policies, laws and consumer and business preferences,” she said, citing anti-money laundering and overreach protections as examples.

Bowman spoke for research including on CBDC. She is at odds with some politicians in this regard. “The Federal Reserve is open to many options for reforming the payment environment,” she said.

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