A U.S. central bank digital currency (CBDC) would “crowd out” the private cryptocurrency ecosystem and protect national security, according to a former top presidential adviser at a U.S. Senate Banking Committee hearing on Tuesday.
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Fast facts
- Daleep Singh, former deputy national security adviser for international economics in the Biden administration, commented from an anti-crypto stance, believing that cryptocurrencies facilitate ransomware attacks and contribute to the evasion of U.S. sanctions.
- He believes the U.S. government embracing a CBDC “is the single best step that we could take [to protect national interests] because it would crowd out the ecosystem of crypto.”
- The phrase “crowding out” generally refers to an economic theory that argues that rising public sector spending and investments drive down or even eliminate spending and investment in the private sector. In this case, Singh believes that CBDCs, issued by a central bank, would crowd out investments into private cryptocurrencies such as Bitcoin.
- More than half of the world’s central banks are developing or testing digital currencies, according to a report from the Bank for International Settlements (BIS) in early May. While China has led the pack in implementing its own CBDC, the U.S. is falling behind as it explores benefits and risks.
- In March 2022, U.S. President Joe Biden issued an executive order that placed the “highest urgency” on the research and development of CBDCs. However, some U.S. representatives have voiced opposition to CBDCs, warning they could be overly surveilled and hurt the financial privacy of American citizens.
- Representative Tom Emmer introduced legislation in Feb that would prohibit the Federal Reserve from issuing a central bank digital currency that “strips Americans of their right to financial privacy.”
- Singh left the Biden administration in June 2022 to join global fixed income management firm PGIM Fixed Income as a chief global economist and head of global macroeconomic research.
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