US needs to take leadership on central bank digital currencies: former CFTC chair

A former financial regulator says the United States needs to step up its research into a central bank-issued digital currency, as the Federal Reserve explores the viability of a digital dollar.

Christopher Giancarlo, who ran the Commodity Futures Trading Commission (CFTC) as its chairman from 2017 to 2019, is working with consulting firm Accenture on pilot programs that will test different use cases for a digital dollar in the United States.

“What’s not being done, and what needs to be done, is to look at the sociological, the commercial, the practical implications of this,” Giancarlo told Yahoo Finance on Monday. “That’s where we think we can help at the Digital Dollar Project: to do some of that experimentation.”

The Fed has been conducting its own research and experimentation on the technology and use cases behind a Fed-issued digital dollar.

The U.S. finds itself lagging other countries on payments infrastructure. The Bank of Mexico in 2019 launched a Cobro Digital (CoDi) system that allows users and merchants to transact in digital pesos using QR codes. The People’s Bank of China recently began user testing a digital renminbi, which would allow transactions even without connection to the internet.

Giancarlo said the Fed’s current work is focused on the architecture of the underlying technology, whereas the Digital Dollar Project aspires to test, among other things, how the private sector will interact with different iterations of a digital dollar.

US is falling behind

Giancarlo said the U.S. needs to be on the “front of the exploration” of central bank-issued digital currencies, bringing up comparisons to American innovation on telecom and space travel.

The key to development, the former CFTC chairman said, is partnership.

“That partnership between the private sector and the public sector is the way we roll in the United States, it’s the way we roll in democracies,” Giancarlo told Yahoo Finance.

A Bank for International Settlements survey shows that 80% of the world’s central banks are researching a central bank-issued digital currency. But U.S. development remains behind the likes of China, which is already dropping digital renminbi into mobile wallets to test its use in cities like Shenzhen.

David Treat, who leads Accenture’s blockchain practice, told Yahoo Finance that his team has already worked with a majority of the G20 central banks on digital currency projects.

“What we’re excited to do is bring that global experience, working with the world central banks to bear, for U.S. progress and dialogue,” Treat said.

For now, the Fed’s outpost in Boston is working with the Massachusetts Institute of Technology to build and test a hypothetical central bank-issued digital currency.

Fed officials are on the fence about whether or not they will ultimately adopt a digital dollar. Fed Chairman Jerome Powell said Monday that while one of the “most attractive” benefits of a digital dollar would be improving financial inclusion, he still has questions about how it may impact the banking system and financial stability.

“We haven’t decided to do a central bank digital currency, to issue one. But we have decided we are going to develop our understanding of what it can offer,” Powell said.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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