By 
In spite of the inherent risks and past failures associated with central bank digital currencies (CBDCs), global policymakers continue to advocate for their development. Throughout November, key figures from the International Monetary Fund (IMF), Bretton Woods Committee, and Bank for International Settlements (BIS) issued strong calls for governments to forge ahead with CBDCs. However, the ongoing challenges and lack of substantial success in existing CBDC projects suggest that policymakers should redirect their focus toward more impactful reforms for a liberated financial system.
The November campaign for CBDCs began with IMF managing director Kristalina Georgieva emphasizing the need to accelerate CBDC development. Bill Dudley, chair of the Bretton Woods Committee, not only urged the United States to adopt a CBDC but also proposed the establishment of an international CBDC standard by the BIS. Cecilia Skingsley, Head of BIS Innovation Hub, defended CBDCs, asserting their potential utility despite being labeled a “solution in search of a problem.”
This push for CBDCs comes at a time when existing projects face difficulties. The CBDCs in The Bahamas, China, and Jamaica have struggled to gain traction, with incentive programs yielding limited success. Even in China, where millions of dollars were given away, usage remained low and inactive. Similarly, Nigeria’s CBDC encountered adoption challenges, leading to cash shortages and public unrest.
The shortcomings of CBDC projects suggest a pattern of government waste at best and potential government control at worst. Despite these issues, international organizations such as the IMF, Bretton Woods Committee, and BIS continue to advocate for CBDC development.
Given the practical failures and looming risks, both the U.S. government and global counterparts should reconsider launching CBDCs. The costs associated with CBDCs outweigh the perceived benefits. Policymakers should resist falling victim to the sunk-cost fallacy, recognizing that past investments should not drive future decisions.
Instead of focusing on CBDCs, policymakers can pursue impactful reforms to create a freer, more accessible financial system. Numerous policy reform ideas, such as enhancing financial privacy protections and establishing oversight of federal regulators, offer opportunities for meaningful change.
Reforming financial privacy, for instance, presents an avenue for creating a more efficient and cost-effective financial system without the need to reinvent currency. Policymakers have the opportunity to prioritize reforms that align with the goal of fostering a liberated and accessible financial landscape.
Comments