During a recent conference on transportation, Neel Kashkari, President of the Minneapolis Federal Reserve Bank, provided a straightforward response when questioned about central bank digital currencies (CBDCs), much to the disappointment of CBDC enthusiasts.
Speaking at the Minnesota Transportation Conference & Expo on May 15, Kashkari primarily discussed topics unrelated to cryptocurrency and blockchain. However, during the Q&A session following his presentation, he didn’t hold back in expressing his assessment of CBDCs.
Regarding CBDCs, Kashkari revealed that the Federal Reserve is currently studying the concept but believes that the issuance of its own digital currency would require congressional approval.
He then raised a fundamental question: “Whether it’s Bitcoin or digital currency, nobody has been able to articulate what problem it is actually solving. […] 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?”
Continuing his critique, Kashkari referred to CBDC discussions as “a bunch of handwaving word salad about maybe it’s better.” He emphasized that there is no evidence to support the notion that CBDCs are superior to existing digital payment platforms.
Kashkari explored potential motivations behind China’s introduction of a CBDC, suggesting that it could enable extensive government monitoring of transactions. However, he clarified that the Federal Reserve would not support such surveillance measures.
The Minneapolis Fed President outlined additional drawbacks of CBDCs. He highlighted the potential for the government to impose negative interest rates on CBDC accounts, a measure not feasible with platforms like Venmo, and one the Federal Reserve does not endorse. Kashkari also mentioned the facilitation of direct taxation through CBDC accounts.
Acknowledging concerns about privacy, Kashkari reassured the audience that the Federal Reserve has no intention of infringing upon the privacy of the American people. Despite his current skepticism, Kashkari expressed a willingness to keep an open mind and await the findings of future studies on CBDCs.