Philly Fed President Says Bank Cryptos are ‘Inevitable,’ but the U.S Won’t Take the Lead

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Will Heasman
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It seems Patrick Harker, the president of the Philadelphia Fed, has finally got the memo, accepting that central bank digital currencies (CBDC) are “inevitable.” Still, that isn’t enough for America to take the lead on them.

Harker, although extremely late to the party, made an important caveat on the U.S plans to create a CBDC. According to Reuters, speaking at a community banking conference on Wednesday, the Fed president addressed the unavoidable adoption of CBDCs.

“It is inevitable I think it is better for us to start getting our hands around it,” he remarked, before adding, “frankly I don’t think we should be the first mover as a nation to do this.”

FedNow or Later?

Nevertheless, for the time being, at least, Harker’s eyes are firmly set on on the Fed’s looming real-time payments system, FedNow. He suggested that the Fed’s attempt at a CBDC will likely follow formal integration of the payments processor.

“I am looking at the next five years after that. What comes next? I do think it is something around digital currency.”

If this is indeed the case, any such wait for a prescribed CBDC in the U.S may be quite a long one.

Unveiling some two months ago, FedNow promised to deliver a ubiquitous payment processor offering instant transferability, with none of the drawbacks associated with traditional interbank legacy systems. It seems Harker isn’t the only one catching on late.

If this sounds familiar, it’s because it is. Essentially FedNow is an imitation of what many cryptocurrencies and blockchain-based payment solutions have afforded for many years.

And just in case you got confused with the ‘Now’ part of FedNow, it’s not actually going to be launched until around 2023, or 2024. That means  – if Harker’s comments are anything to go by – that we might not see a CBDC coming out of the U.S for at least ten years.

Playing Catch Up

While the Philly Fed comes to terms with the swiftly evolving world of finance, its international counterparts have already firmly set their positions.

In fact, the European Central Bank (ECB) recently revived plans to create its own CBDC in direct defiance to Facebook’s Libra. Last month, ECB board member Benoit Coeure called Libra a “wake-up call,” recommending that the central bank resurrect its long term digital currency project.

Of course, Libra has rung alarm bells for most central banks, with China’s attempt being a prime illustration of a state-backed digital asset. The CBDC, which has been in the works since 2014, was spurred into action following Libra’s announcement. It’s thought that the inception of Libra, and its potential to support capital flight from China, may have caused the People’s Bank of China to enter this domain with greater urgency.

Regardless, with the plethora of national CBDCs crawling out of the woodwork, and the Fed’s apparent lack of appetite for digital currencies, the U.S could be at serious risk of being left behind.