Deputy Treasury Secretary Discusses US CBDC Plans

Oct 7, 2020 at 16:20 UTCUpdated Oct 7, 2020 at 16:47 UTC.The U.S. Treasury Department is evaluating the merits of a government-sponsored digital currency, said one of its top officials Wednesday.

Deputy Treasury Secretary Justin Muzinich, speaking to the Atlantic Council during a digital seminar on trans-Atlantic economic relations, said the administration is studying a potential central bank digital currency tied to the dollar, alongside the Federal Reserve, the U.S.' central bank.

Muzinich noted the Boston branch of the Federal Reserve is already evaluating CBDCs, pointing to Governor Lael Brainard's recent comments and the group's work with MIT's Digital Currency Initiative to research different technologies.

The Federal Reserve and the Treasury Department are both part of an international working group evaluating digital currencies as well, Muzinich said.

At the same time, Muzinich said finding a balance between preventing illicit activity and respecting consumer privacy will be a challenge.

"Because how much of a consumer's daily transactions should the government see, in a digital world, for instance? So there are a variety of factors that we are thinking through," he said.

During prepared remarks prior to the Q&A, Muzinich also said the U.S. and Europe must cooperate in regulating cryptocurrencies.

Cryptocurrencies can be used as more than just a means of payment, but can also provide some functions typically performed by governments.

"Treasury has made it clear that the obligation to comply with U.S. laws is the same, regardless of whether a transaction is denominated in traditional fiat currency or digital currency. Existing laws apply to digital assets in no uncertain terms," he said.

Even digital currency efforts that comply with the spirit and letter of AML laws might raise concerns, such as if a stablecoin shifts from being fully reserved to being partially reserved or decides to change the makeup of its underlying basket of reserve currencies.