How a culture clash between central banks and techies is holding back CBDCs

Chris Ostrowski in OMFIF summarises lessons from a recent CATO conference on digital currencies:

‘Just because you’ve been relevant for the last 100 years does not mean you’ll be relevant for the next 100 years.’

Sunayna Tuteja’s reflections stood out at a digital currency conference in Washington DC last month for two reasons. First, because few people challenge central bankers so directly on the threat posed by digital currencies and second, because this challenge came from a serving central bank official.

As the chief innovation officer of the Federal Reserve System, Tuteja brought some of the Silicon Valley mentality of her former career as head of strategic partnerships and emerging technologies at TD Ameritrade to a room full of central bankers, who are beginning to see the first outlines of a new digital financial landscape.

Though the menace of real macroeconomic harm from cryptocurrencies remains small and remote, a move to a trustless, decentralised economic model is the greatest threat to central banks’ operating models in centuries. It’s therefore reassuring to see so many central banks applying time, resources and intellectual firepower to understand the risks and opportunities posed by the overlapping and unstoppable forces of cryptocurrencies, blockchain and Web 3.

It is hard to imagine two communities with less in common than central bankers and those working in Web 3. The traditions, culture, priorities and even psychology of both groups could scarcely be further apart. But as Covid-19 restrictions lift, there will be more opportunities for central bank policy-makers and Web 3 technologists to meet in person. We are likely to see central banks innovating with digital money in ways that seemed unimaginable before the 2020s.


Chris then points why collaboration and learnings between the two is crucial:

It would, however, be a mistake of historic proportions if society stopped using public money and threw away ‘trust’ as a concept. The challenge for central banks and other actors in the existing financial architecture is to create a form of public money on a blockchain that can deliver the promises of a decentralised digital economy.

Just as at the beginning of the internet, it can be hard to envisage how the Web 3 world of non-fungible tokens, decentralised finance and cryptocurrencies can be anything more than just a niche fad, but the promise is real and the changes will be far-reaching.



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