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(Kitco News) -
Nine members of the United States Congress wrote a letter to Susan Collins, President of the Federal Reserve Bank of Boston yesterday, warning that the Bank’s central bank digital currency (CBDC) initiative could give certain companies an unfair advantage.
Congressman Tom Emmer (MN-06), the Ranking Republican on the House Financial Services Subcommittee on Oversight and Investigations, and Ranking Member Patrick McHenry (NC-10), wrote the letter outlining the lawmakers’ concerns about ‘Project Hamilton’.
“It was brought to our attention that some firms participating in the collaboration may be planning to use Project Hamilton to research, develop, and scale CBDC products with the intent to then sell those products to commercial banks,” Emmer wrote.
“The unfair advantage that some private companies could enjoy from this partnership and the failure to ensure the principles of privacy, sovereignty, and free markets should be concerning to every American.”
Project Hamilton is a collaboration between the Federal Reserve Bank of Boston and the Digital Currency Initiative at the Massachusetts Institute of Technology to research the potential development of a central bank digital currency (CBDC) in the United States.
The letter was also signed by House Financial Services Committee members Ann Wagner (MO-02), Ted Budd (NC-13), Bill Huizenga (MI-02), Andy Barr (KY-06), French Hill (AR-02), Anthony Gonzalez (OH-16), and Warren Davidson (OH-08).
It asks pointed questions about Project Hamilton’s funding sources and other forms of engagement with the private sector. The lawmakers said they want to know which firms are or have been involved with Project Hamilton, to what extent Project Hamilton has already engaged with the firms, whether Phase II of the project will involve continued engagement with the private sector, and whether the Boston Fed intends to fund private sector startups through the project.
They also expressed worries about the risk that firms already involved with Project Hamilton will have a regulatory advantage over competitors and asked how the project plans to address concerns about Americans’ financial privacy and financial freedom in the context of a CBDC.
“It is important that the firms engaging with Project Hamilton do not receive an unfair competitive advantage over current or future competitors,” Emmer wrote. “Neither the federal government nor the Federal Reserve Banks should be in the business of picking winners and losers in the private markets.”
Emmer has expressed his concerns about a U.S. CBDC before. In January, he introduced a bill to prohibit the Federal Reserve from issuing a CBDC directly to individuals.
There are a number of CBDC projects currently underway in the United States. The Federal Reserve Bank of New York announced a 12-week CBDC pilot project in collaboration with commercial banks on Nov. 15, writing that its New York Innovation Center (NYIC) will participate in a proof-of-concept project for a CBDC. The project is designed to test “technical feasibility, legal viability, and business applicability of distributed ledger technology” on a regulated liability network (RLN).
The New York Fed also announced the launch of Phase II of Project Cedar, which explores the technical framework for a “theoretical wholesale central bank digital currency (wCBDC)”. Project Cedar Phase II x Ubin+ is a joint effort between the NYIC and the Monetary Authority of Singapore (MAS) intended to investigate how wCBDCs could improve the efficiency of cross-border wholesale payments involving multiple currencies.
But even within the Federal Reserve Bank of New York itself, there are dissenting voices about the appropriateness and feasibility of a CBDC. On Nov. 23, Antoine Martin, a financial stability advisor at the New York Fed, suggested that “Instead of issuing a retail CBDC, central banks could support stablecoins by allowing them to be backed one-for-one with balances in a central bank account.”
Martin proposed that private-sector stablecoins be utilized by the central bank in lieu of government-developed CBDCs, an approach that he said more closely aligns with the economic model of capitalism.
