During an interaction with the press at the Minnesota Transportation Conference & EXPO, Neel Kashkari, president and CEO of the Federal Reserve Bank of Minneapolis, when asked about CBDCs and digital assets, replied that the authority is studying it. He further added that the Fed believes it would take an act of Congress to allow it to issue its digital currency.
While talking about CBDCs he pointed out the cost-benefit and said that there are no reports to study the benefits provided by Bitcoin or digital currencies and the problem these assets are solving.
He said “I can send anybody in this room $5 right now using Venmo. So, what is it that a central bank digital currency can do that Venmo can’t do?” “It’s just a bunch of hand-waving word salad about maybe it’s better. But there’s no evidence that it is better,” he continued.
Kashkari continued discussing the drawbacks, coining that the government could impose negative interest on an account. “You can’t do that at Venmo and we don’t want to do that at the Federal Reserve,” he said. A CBDC would also facilitate direct taxation of an account, he added. “I share a lot of your privacy concerns,” Kashkari said, addressing the person who asked the question. “We have no interest in violating the American people’s privacies at the Federal Reserve.”
During the interaction, he also talked about high inflation sprawling in the country, fiscal policy, bank runs, unemployment, labour, immigration and environmental sustainability. It is quite interesting to note here that there is a stark distinction among states, based on ideologies. The two parties in the US, the Democrats and the Republicans have extreme perspectives on cryptocurrencies and digital assets. The former on the one hand drafts legislation that is considered counterproductive for the expansion of crypto assets in the country.
Democrat-ruled states such as California, New York and Hawaii are considered the worst states for crypto assets because of high taxation and regulation. States such as Wyoming, Colorado Florida and Arizona ruled by Republicans are considered best for expansion of the crypto assets because of no or minimal taxation policies and easy regulations. Here, Minneapolis, a city in the state of Minnesota is a Democrat-ruled state.
The U.S. government’s views on the blockchain are quite sceptical, coining it as the “technology of tomorrow”. While competitors aggressively pursue efforts today to integrate blockchain, data, and the information environment. It is important to note that China is well ahead of the United States in blockchain policy, innovation, and implementation across society. To compete across all elements of national power, the United States requires a coherent, coordinated blockchain strategy and supporting policy.
The country should explore blockchain technology with the same earnestness as other emerging technology research to jumpstart that discussion. Blockchain is not a weapon system by itself, it is a critical enabling technology of the information environment. The challenge is not only educating more people inside the U.S. government about blockchain technology but also mastering blockchain and its applications as a nation first. Miscomprehending blockchain undermines U.S. competitive efforts across all instruments of national power and allows China the ability to shape tomorrow’s information environment.
Neel Kashkari took office as president and CEO of the Federal Reserve Bank of Minneapolis on Jan. 1, 2016, following a national search conducted by the Bank’s independent board of directors. In this role, he serves as a voting member on the Federal Open Market Committee, bringing the Ninth District’s perspective to monetary policy discussions in Washington, D.C. In addition to his responsibilities as a monetary policymaker, Neel oversees all operations of the Bank, including supervision and regulation, Treasury services, and payments services.