Fed nominee Warsh says no to a US digital dollar in 1 fiery hearing

(Bloomberg) — Donald Trump’s nominee to lead the Federal Reserve, Kevin Warsh, declared the central bank lacks the legal authority to create a central bank digital currency (CBDC) and that doing so would be a “bad policy choice.” The statement, made during a fiery confirmation hearing before the Senate Banking Committee, signals a significant potential roadblock for the development of a US digital dollar.

“The Federal Reserve has no authority to issue a digital currency,” Warsh said during the hearing on Tuesday. He further characterized the move as a poor policy decision, aligning himself with crypto advocates who are skeptical of government-controlled digital currencies.

Warsh’s comments on a CBDC come as he navigates a turbulent confirmation process. His nomination is currently stalled by Republican Senator Thom Tillis, who has vowed to block a vote until the Department of Justice drops a controversial investigation into the current Fed chair, Jerome Powell [1, 4]. At the same time, Democrats have aggressively questioned Warsh’s political independence from President Trump, who has publicly demanded lower interest rates.

The nominee’s definitive stance against a US CBDC, if he is confirmed as chair, could halt years of research and exploration by the central bank into a digital version of the dollar. Such a move would have profound implications for the future of finance in the US and could be seen as a victory for decentralized cryptocurrencies like Bitcoin, which would avoid a powerful, government-backed competitor.

A Battle on Two Fronts

The hearing on April 21 underscored the multiple political challenges facing Warsh. Beyond Senator Tillis’s procedural hold, Democrats on the committee voiced strong opposition. Senator Elizabeth Warren accused Warsh of being a “sock puppet” for Trump, pointing to what she described as a flip-flop on interest rate policy to align with the president’s wishes [1].

Warsh pushed back against these claims, asserting his independence. “The president never once asked me to commit to any particular interest rate decision, and nor would I agree to it if he had,” Warsh testified, according to prepared remarks and hearing transcripts [4]. The nominee faces the difficult task of balancing the president’s demands for rate cuts with an inflation rate that remains elevated at 3.3 percent [4].

'Stay in Its Lane'

The CBDC issue is part of Warsh’s broader vision for a more narrowly focused Federal Reserve. He has been a vocal critic of the central bank straying beyond its dual mandate of promoting stable prices and maximum employment. In his prepared remarks, Warsh argued that the Fed should “stay in its lane” and avoid wading into “fiscal and social policies” such as climate change or economic inclusion [2].

“Low inflation is the Fed’s plot armor, its vital protection against slings and arrows,” Warsh said, framing the recent surge in inflation as a failure that erodes public trust in the Fed’s independence [2]. He has repeatedly stated that “inflation is a choice, and the Fed must take responsibility for it” [2, 4].

Warsh’s opposition to a CBDC is a significant development for the digital asset industry. While his position may be welcomed by supporters of decentralized cryptocurrencies, it also signals potential long-term regulatory headwinds from a powerful policymaker who appears skeptical of expanding the central bank’s role into new digital frontiers. His confirmation would place a formidable opponent of a digital dollar at the head of the world’s most influential central bank.

This article is for informational purposes only and does not constitute investment advice.