Global: Fed Governor Waller: No Current Need for a Central Bank Digital Currency (CBDC)

Federal Reserve Governor Christopher J. Waller stated that the evolution of payment systems should be primarily driven by the private sector, with the Federal Reserve stepping in only when market inefficiencies or issues arise that cannot be managed independently. Waller made these remarks on Tuesday (Nov. 12) during his address at The Clearing House Annual Conference in New York City.

According to Waller, competition within the private sector is often the best way to assess the value of new technologies in payments, as it allows viable ideas to emerge organically without the need for central bank intervention. “The private sector, through competition, is typically best situated to separate good ideas from bad ones, rather than relying on central banks or other public institutions to make those determinations,” he said.

While government involvement is generally minimal in competitive markets, Waller acknowledged that the Fed’s role becomes essential when markets face issues like coordination challenges, lack of resilience, or inefficiencies that the private sector cannot solve alone. As an example, he highlighted the Federal Reserve’s FedNow® Service, which enables thousands of banks and credit unions to connect through a cohesive payment network, thus addressing coordination barriers in real-time payments.

“Our work with FedNow exemplifies how government can assist in resolving coordination challenges by utilizing our connections with thousands of financial institutions,” Waller explained. “This aligns with my view of the government’s role—focused on specific market gaps that the private sector cannot efficiently resolve.”

However, Waller remains unconvinced that a central bank digital currency (CBDC) addresses any critical issue that justifies its creation. Referring back to his 2021 remarks, he questioned what market failure or inefficiency a CBDC would resolve, noting that he still has not received a compelling answer.

“In over three years, I have yet to hear a satisfactory explanation of how a CBDC would effectively address a clear need in our current system,” Waller concluded, reinforcing his stance that the private sector is best positioned to lead advancements in the payments landscape.