BPI’s Paige Pidano Paridon Testifies on CBDC Before House Subcommittee

Washington, D.C. — Paige Pidano Paridon, senior vice president and senior associate general counsel of the Bank Policy Institute, will testify this afternoon before the U.S. House Subcommittee on Digital Assets, Financial Technology and Inclusion on the implications of central bank digital currency. Her testimony examines misconceptions about the purported benefits of a CBDC and highlights private sector innovations that could accomplish those same benefits without the risks a CBDC would present.

Key quote regarding retail CBDC: “We believe that — at this point — there is little evidence that a CBDC would bring measurable benefits to the U.S. economy, or that it is necessary to defend the dollar’s status as the world’s reserve currency. Furthermore, a CBDC comes with a series of difficult policy and operational issues and risks creating financial instability.”

What’s wrong with a retail CBDC?

CBDC research has largely been focused on a retail solution. However, a retail CBDC introduces significant policy and operational challenges that would undermine its utility and threaten financial stability.

The testimony specifically points to the following problems with a retail CBDC:

  • It would disrupt credit availability by shifting customer deposits into a CBDC that cannot be lent out, thus reducing the supply of credit to businesses and consumers;
  • It would not increase financial inclusion because it fails to address the underlying reasons why certain individuals are unbanked;
  • It raises serious data protection and privacy concerns because a central repository of financial transactions would be an attractive target for cybercriminals;
  • It would do little to increase cross-border efficiency in the United States given that the U.S. already has the RTP real-time payments system and many of the challenges associated with cross-border payments have to do with differences in anti-money laundering compliance across jurisdictions;
  • It raises core monetary policy considerations including whether a CBDC could pay interest and, if so, how that would influence central bank reserves; and
  • It would require an act of Congress to authorize the issuance of a CBDC.

The benefits of a wholesale CBDC are still being studied. Nonetheless, banks continue to innovate.

The testimony points out that while wholesale CBDC is still being studied, it’s unclear whether CBDC is necessary given that most U.S. dollar transactions are already conducted with digital money — that is, dollars deposited at the bank. Nonetheless, banks are perpetually innovating and seeking opportunities to leverage new technology — like blockchain and distributed ledger technology — to enhance the speed, efficiency and security of the financial system.

The testimony reiterates support for the Federal Reserve’s resolve to base the decision to move forward with CBDC on data and the actions of Congress. It also urges regulators to encourage innovation within the regulated banking sector by collaborating with banks on research and experimentation around the discrete use cases of distributed ledger and blockchain technology.

To access a copy of the testimony, please click here.


About Bank Policy Institute

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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Austin Anton
Bank Policy Institute


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