Digital Dollar Would Undermine Banks, No Compelling Case for It, US Bankers Argue

cryptonews.com:

The purported benefits of a central bank digital currency (CBDC) in the United States are “uncertain and unlikely to be realized,” and there is no compelling case for it, the American Bankers Association (ABA) has said in a letter to the US Federal Reserve (Fed). The letter also warned that a CBDC could undermine the banks’ business model.

In the letter, the bankers argued that a US CBDC is “not necessary to ‘digitize the dollar,’ as the dollar is largely digital today.” It added that a CBDC would “fundamentally rewire our banking and financial system” and would change the relationship between citizens and the Federal Reserve.

“The main policy obstacle to developing, deploying, and maintaining a CBDC in the real economy is the lack of compelling use cases where a CBDC delivers benefits above those available from other existing options,” the letter stated.

The ABA said in its letter to the Fed that,

“As we have evaluated the likely impacts of issuing a CBDC it has become clear that the purported benefits of a CBDC are uncertain and unlikely to be realized, while the costs are real and acute.”

And it concluded that,  

“Based on this analysis, we do not see a compelling case for a CBDC in the United States today.”

Meanwhile, another key reason for the bankers’ opposition to a US CBDC, often referred to as a digital dollar, is that it would act as a direct competitor to private bank deposits, and limit the availability of credit to both businesses and individuals.

A CBDC would draw retail deposits away from private banks and “into accounts at the Federal Reserve,” the letter said. From here, funds cannot be lent back into the economy, the bankers warned.

It noted that retail deposits account for 71% of bank funding today, and said