US Treasury officials see CBDC benefits for financial stability

The digital dollar could strengthen financial stability. Analysts at the Office of Financial Research at the U.S. Treasury (OFR) reached this conclusion.

Analysts considered the fears about the possibility of forming the ‘bank run’ in the event of crises arising from the launch of the digital dollar to be exaggerated. Earlier such risks, as a negative consequence of CBDC, were mentioned in its report by the Fed.

According to OFR analysts, the digital dollar would provide authorities with an early-warning system for problems in the financial system. The active conversion of funds into CBDC would serve as such a signal.

“Monitoring will allow regulators to more quickly determine when a bank run begins and to respond to threats arising from troubled banks,” the document states.

According to the specialists, such insights could reduce the incentive for large depositors to initiate this process.

Analysts also noted a decline in incentives for customers of a ‘weak bank’ to move funds to a more reliable institution in calmer times. This would be possible due to a more conservative policy by financial institutions compared with the pre-CBDC era.

“We view [the OFR report] as a tool that supporters of the digital dollar can use to justify plans for its launch,” wrote Jarret Zaiberg, a Cowen Group analyst.

The report’s conclusions align with the latest remarks by Fed Vice Chair Lael Brainard, who saw CBDC as a neutral trusted settlement layer in the future crypto-financial system.

Earlier, in June 2022, the BIS named national digital currencies the foundation of the monetary systems of the future.

Earlier at congressional hearings, Fed Chair Jerome Powell said that a strategy for implementing CBDC was being prepared.

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