Senators mull Fed digital currency as China races ahead with its own
Senators put the potential creation of a central bank digital currency in the spotlight at a June 9 subcommittee hearing as other countries, including China, move forward with their own digital currencies.
China's ongoing creation of its digital yuan had many lawmakers on the Senate Banking Committee Subcommittee on Economic Policy questioning to what extent it would impact the U.S. financial system. Some said the U.S. needs to take action to ensure the U.S. dollar maintains its leading role in the world economy, while others said it should not raise immediate concern.
The fact that China has moved ahead "doesn’t mean that it's inevitable that the yuan will replace the dollar," Sen. Pat Toomey, R-Pa., said. He and other lawmakers said they believed that the Chinese government established its digital currency in order to strengthen its grip on the Chinese economy and increase surveillance of its citizens.
Conversely, Senate Banking Committee Chairman Sherrod Brown, D-Ohio, said the U.S. must take action as countries around the world make progress.
For their part, financial institutions worry that the digital currency could upend the existing financial system by draining banks of deposits and, consequently, their ability to make loans. Federal Reserve Chair Jerome Powell has said his agency plans to publish a paper examining the possibility of a CBDC this summer, but noted such a currency should complement, not supplant, the existing system.
Source: S&P Global Market Intelligence
