American Association of Credit Unions Says CBDCs Are Not Worth the Cost

As the United States explores the possibility of rolling out a central bank digital currency (CBDC), a leading trade organization has opposed the idea.

In a July 6 letter to the U.S. Department of Commerce, the National Association of Federally-Insured Credit Unions (NAFCU) warned that the cost of developing a CBDC outweighs the touted benefits of the currency.

NAFCU noted that instead of a CBDC, there are other improved alternatives that can achieve the same goals, such as alternative payments and promoting financial inclusion.

Alternatives to CBDCs

Andrew Morris, who sits on the NFCU’s senior research council, noted that options such as private and public payments could be explored for sector growth. On financial inclusion, the official said the government could work with credit unions to reach more people since they are engaged with communities.

Notably, the organization had previously written to the Federal Reserve on the deployment of CBDCs, where the authors warned that the currency could also erode financial stability.

“The Federal Reserve must demonstrate that a CBDC will be superior to alternative methods in promoting financial inclusion, protecting consumer privacy, guarding against criminal activity, and ensuring financial stability. NAFCU anticipates that the costs and risks associated with introducing a CBDC will outweigh the potential benefits,” NAFCU said.

Maintaining American Competitiveness

Market watchers view the failure of CBDC development as a barrier to US competitiveness globally. However, NAFCU has recommended that the United States be guided by principles that ensure a level playing field for financial institutions when engaging with cryptocurrencies.

The organization noted that authorities should apply customer protections to companies that facilitate the use of digital currencies while supporting responsible innovation within the credit union sector.

“In promoting the competitiveness of the United States in the broader area of ​​digital asset business, NAFCU encourages ITA and Commerce to support a level playing field, consistent law enforcement on financial consumer protection and encouraging responsible credit union innovation,” Morris said.

The letter to the Commerce Department is consistent with a previous White House executive order from President Joe Biden calling on federal agencies to develop a framework for the development of digital currencies.

Additionally, the department also received a report on the competitiveness of digital assets presented by the Bitcoin Policy Institute. As reported by Finbold, the report explores how an open monetary network can advance US interests.

Andrew B. Reiter