Toomey: Congress Should Encourage Continued Development of Private Digital Currencies
Washington, D.C. – In his opening statement at today’s U.S. Senate Banking Economic Policy Subcommittee hearing on digital currencies, Ranking Member Pat Toomey (R-Pa.) encouraged the continued development of private digital currencies while remaining hesitant about the creation of a central bank digital currency.
Expressing
concerns over the potential interference with free enterprise and infringements
on privacy, Senator Toomey said the private sector is best positioned to
increase access to financial services through digital currencies while
increasing privacy protections.
Ranking
Member Toomey’s remarks, as prepared for delivery:
Thank
you, Chair Warren.
Before
Congress would decide to authorize creation of a central bank digital currency
in the U.S., we need to answer some critical questions. One of them is: What
problem is a central bank digital currency trying to solve? In other words, do
we need one? It’s not clear to me yet that we do.
Some
say a central bank digital currency is needed to enable the Fed to provide
retail banking accounts to Americans. In my view, turning the Fed into a retail
bank is a terrible idea. Our retail banks do a great job of serving the needs
of consumers because they compete with one another in the private sector.
In
addition to banks, rapidly evolving technology companies are expanding access
to the financial system by providing all types of financial products and
services to consumers, including people of very modest means. We don’t need a
state-sponsored bank interfering with this successful free enterprise system.
Nor do we want a government entity like the Fed positioned to possibly infringe
on our privacy, tracking our personal information or monitoring bank
transactions. And does anyone think that the government could provide the high
quality customer service that consumers want from a retail bank?
Others
say the U.S. needs to create a central bank digital currency to compete with China.
The fact that China is creating a digital currency does not mean it’s
inevitable that the yuan would displace the U.S. dollar as the world’s reserve
currency. In fact, there are reasons to believe China’s digital currency will
be unappealing.
China
has a state-controlled economy and repressive, authoritarian government. It has
capital controls on the Yuan that make it unattractive as a reserve currency.
And China’s motivation for launching a digital Yuan undoubtedly includes
tightening its grip on its economy and enhancing surveillance of its citizens
and others. For example, China likely wants to track every transaction done
with its digital currency, and to directly control this currency.
China
is also reportedly considering putting expiration dates on the digital Yuan to
force people to spend it. With features like these, it’s doubtful people will
flock to the digital Yuan and abandon the U.S. dollar as the world’s reserve
currency.
While
I’m not certain we need a central bank digital currency, I think we should
consider the development of private digital currencies. After all, it is the
private sector—not government—that’s been responsible for developing
cryptocurrencies, including stablecoins.
Private
digital currencies have the potential to increase access to financial services
for all Americans while increasing their privacy. People have raised legitimate
issues about private digital currencies, such as their use in illicit activity
and their possible effects on monetary policy and on our existing financial
infrastructure. We need to discuss and understand these issues, and address
them if needed. But we shouldn’t lose sight of the tremendous benefits the
underlying technology of digital currencies offers, and that disintermediated
payments offer. That’s why we should encourage the continued development of
private digital currencies.
I
look forward today’s discussion, and thank our witnesses for sharing their
expertise.
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