Trump's Federal Reserve Chair Replacement Kevin Warsh Doesn't Rule Out Introducing A CBDC At Confirmation Hearing
"A digital dollar backed by America’s full faith and credit would be an important part of a reformed financial and monetary architecture," Warsh said.
Kevin Warsh, President Donald Trump’s pick for Federal Reserve Chair, recently said that he does not support a central bank digital currency (CBDC). Kinda…
On Tuesday, April 21st, Warsh spoke at a confirmation hearing for the Senate Banking, Housing, and Urban Affairs Committee, where he was grilled on a myriad of questions in regard to his economic policies, Fed independence and more.
Banking Committee Chairman Sen. Tim Scott told CNBC’s Squawk Box that he approved of Trump’s decision to nominate Warsh and that he is ready for the job.
“This is a good decision by President Trump to choose Kevin Warsh. Kevin Warsh is a guy who’s battle-tested. He’s ready for the job, and frankly, we are more likely to see more Americans experiencing their version of the American Dream because Kevin Warsh will be chairing the Fed.”
“It’s time for the Fed to get back to independence…We want to prioritize every single kitchen table in America [by] having a Fed chair that keeps them [the Fed] straight and direct.”
“He was there during the [financial] crisis…so the good news about Kevin Warsh is he is ready for the task, number one. Number two, President Trump chose him because he’s an amazing individual who’s had private sector and public sector experience.”
During the hearing, Warsh was asked about his position on CBDCs. The interaction was short:
Sen. Bernie Moreno (R-OH): Let’s move on to central bank digital currencies. Do you agree that the Federal Reserve has no legal right to issue a central bank digital currency?
Warsh: Senator, I agree that they don’t have the right and I think it would be a bad policy choice.
Moreno: So let me just put an exclamation mark on that. Under your chairmanship of the Federal Reserve, you will not have the Federal Reserve explore or any way move towards a central bank digital currency.
Warsh: If it’s within the power of the chairman of the Federal Reserve, I agree with that statement.
Warsh’s initial statement would appear that he rejects CBDCs, but his follow-up statement appears to place a condition on that rejection and leaves the introduction of CBDCs as possible.
As previously noted by The WinePress in January, Warsh has previously endorsed a CBDC.
In a 2022 op-ed for The Wall Street Journal, Warsh warned that China’s digital currency the yuan threatened the dollar’s dominance. In order to strengthen the dollar, Warsh proposed a digital dollar in the form of a CBDC, but downplayed the effectiveness of a stablecoin, which the Biden administration was looking into (and, of course, was officially codified into law per the GENIUS Act signed last year by President Trump).
He wrote (excerpts):
Enter the game-changer of cryptocurrency. Don’t be deceived by the thousands of private cryptocurrencies masquerading as money in some form of circulation. Many of these schemes are fraudulent, and most are worthless. Cryptocurrency is a misnomer. It isn’t secretive and it isn’t money. It is software. And it is a significant technological breakthrough that poses promise and peril for the American-led global financial system. In the hands of a powerful sovereign such as China, the new software is an effective way to launch the yuan into the big leagues.
The Fed and Treasury should cease to play the slow game while China builds a new digital monetary and financial architecture. America’s other big trading partners won’t wait around while U.S. authorities consider incremental reforms. The status quo is neither satisfactory nor sustainable.
One option, popular among some in Washington, is for the U.S. to create a dollar copycat of China’s digital yuan. The Fed would intermediate wholesale and retail payments, including as the direct counterparty to U.S. consumers. This is at odds with the American ethos of privacy from government intrusion. The specter of state surveillance of individual spending is dangerous. The interface with citizens should rest with the private sector.
The Biden administration appears to promote another alternative: Give the government’s imprimatur to privately issued stablecoins. I am skeptical that a host of private cryptocurrencies are sufficiently strong and reliable proxies for the U.S. dollar. I also doubt that bank-like regulation of private stablecoins would ensure their stability in stressful times, absent government bailouts.
So what to do? The U.S. should announce the essential design features of a digital dollar to be used exclusively for wholesale transactions. The existing wholesale payment system is slow, cumbersome, opaque and expensive. The new regime would more effectively intermediate payments among the government, financial firms and foreign central banks. Settlements would be made faster. Payments would be cheaper. Cross-border transfers would be seamless. Money creation would be more transparent.
A currency reigns supreme until it doesn’t. The new digital dollar would strengthen the currency for a new era, and bolster America as leader of the global economic system. Compared with China’s e-CNY, the proposal has superior attributes of sovereign control, monetary soundness, financial innovation and individual privacy. The U.S. and its allies need sound and stable money to escape a period of weak output, high inflation and geopolitical conflict. A digital dollar backed by America’s full faith and credit would be an important part of a reformed financial and monetary architecture.
Walsh made similar arguments in a story written for American Renewal.
Unchained Crypto wrote:
Warsh invested in the now-defunct algorithmic stablecoin project Basis, which launched the algorithmic stablecoin Basecoin, in 2018 and the crypto index fund manager Bitwise in 2021, both times as an angel investor. Bitwise also lists Warsh on its website on a list of advisors and investors. It is unclear exactly how much Warsh invested in each firm. Warsh exited Basis on December 13, 2018, according to Pitchbook.
In news coverage at the time, Warsh’s investment in Basis was contextualized by his critique of bitcoin as a currency with extreme price fluctuations, because of Basis’ claim that it could keep the price of its token pegged to the US dollar. However, he seemed supportive during this period of bitcoin in the way it is proposed as an asset held in a national reserve, according to the cited opinion piece published in the Wall Street Journal. Bitcoin’s “price volatility significantly diminishes its usefulness as a reliable unit of account or an effective means of payment,” he said. “Bitcoin might, however, serve as a sustainable store of value, like gold.”
However, in 2023, just a few months after his WSJ piece was published, Warsh clarified in a podcast that he thinks a wholesale (wCBDC) is what is needed, referring to a CBDC that is designed for interbank and government lending, and not necessarily in a retail setting.
“My suggestion is that there be a central bank digital currency, but it'd be quite different from that, which is much discussed among government authorities. That is, it's confined to the wholesale market. There ought not be a retail facing, consumer facing, central bank digital currency for recent both of politics and economics.
“[…] So here's what I'm proposing in what I describe as a wholesale only central bank digital currency. It's decentralized, in the sense that we're using the blockchain as the base foundation to conduct this business. The trail is auditable, the money can only be sent once and only once, any changes, the block would have to be seen inside of the block, it could happen instantaneously. And if some court had a warrant that it was being done for bad aims, you'd be able to see that distributed ledger perfectly.”
Interestingly enough, Warsh condemned regulating stablecoins and treating custodians like banks — which is what Trump’s Genius Act does.
“The Stablecoins are fine so long as we regulate them like a bank: I think this is a dangerous and bad idea, I want to be very clear on that. So I think broadly the idea of taking the Stablecoins that are out and about subjecting them to bank regulation is a bad idea, why? Because bank regulation is imperfect.
“And two, when you're regulating something that purports to be the US dollar and it fails, in my view the Political Economy makes it such that you almost assuredly have to bail it out. Because you don't want the dollar to be falling in its prestige and its privilege, you don't want there to be people that say wonder if that dollar is really worth it after all?
“So, I am uncomfortable with the idea of a regulatory framework as the panacea for Stablecoins. And in that, at least in the pre-FTX days, my voice seemed to be in the minority, large number of thoughtful legislators from both parties seemed positively inclined to that idea. And I will say it worried me and continues to worry me tremendously.”
At the end of the day, Warsh and the Fed and the Treasury will embark on a new tokenized economy. Chairman Scott told Fox Business:
“We have to embrace not only the digital asset conversation, we have to embrace the future of finance in the world and requires us to have a conversation about the future being here in America first. We need to be the most dominant economy in the world. It requires us the have a serious conversation about crypto firms being domiciled here, founders creating the next big thing in America, and we’re going to get that done.”
Trump said last year, referring to the Genius Act, that “behind the scenes, the technical backbone of the financial system” is out of date is and says it is undergoing an “upgrade” using “state-of-art crypto technology,” presumably referring to tokenization and blockchain technology.
AUTHOR COMMENTARY
We covered it back in January that Trump’s nominee was strange because Warsh’s history of fiscal policy as a Fed Governor seems to run contradictory to what Trump wants. CoinDesk noted that several observers say Warsh is a wrong pick for the Fed that’s expected to toe Trump’s line.
“Kevin Warsh has been a monetary policy hawk his entire career and most importantly, during a time when the labor markets fell out of bed. His dovishness today stems from convenience. The President risks getting duped,” Renaissance Macro Research said on X.
“I read the FOMC transcripts during the GFC. His quotes scared me,” Bloomberg’s Ana Wong said.
Then you see his previous statements on CBDCs and stablecoins, and the choice seems even stranger.
But this IS politics, and these people are just sock puppets anyway, so why bother holding them accountable when they just change their narratives when it is convenient and the situation demands it? Trump once derided Bitcoin and crypto as a scam years ago. Same with Larry Fink and BlackRock. Well, here we are now, and those two are the biggest proponents of tokenization!
Yet how ironic is it that Warsh once condemned the very piece of legislation that Trump signed last year?
Nevertheless, Trump and Warsh are close allies. Warsh reportedly was one of the people who had been coercing Trump to take Greenland, and is a close ally of Netanyahu, so it all makes sense in this regard why Trump Bibi picked Warsh. But if Warsh leaves interest rates unchanged when he takes over, I am going to laugh when Trump crashes out.
What is absolutely fascinating is that when Trump took office during his first week back, he signed an executive order banning a CBDC. So what does he do then? Gives you stablecoins, which are privatized CBDCs and are still programmable and permissioned, and arguably even worse in some ways because stablecoins do not have as much regulation behind them as per a CBDC — both are bad, but a stablecoin framework some would argue is worse.
Then Warsh comes along, Trump’s guy, and what does he indirectly say (read between the lines)? I am going to bring you a CBDC!
Whoops! Looks like the great MAGAcian bedazzled the masses again with that one, didn’t he?
Proverbs 20:17 Bread of deceit is sweet to a man; but afterwards his mouth shall be filled with gravel.
We even said at the time the Genius Act was signed that this could all still be a pretext for a CBDC for the very reasons Warsh once articulated. It’s honestly incredible the level of deceit and fraud taking place right in front of our eyes.
For now, it appears the U.S. maybe is going the route of wCBDC for interbank and government lending, stablecoins as programmable digital dollars, and the eventual tokenization of all stocks, bonds, assets, commodities, and identities; all interlinked in an interoperable system that can work with other economies around the world. This is similar to what the U.K. and the Bank of England are doing at the moment.
Jerome Powell's term is up next month, and presumably Warsh will step in, and we shall see what happens next.
Having said all of that, we have already covered multiple times that this push to lower interest rates and vastly expand the money supply is designed to push the country and the world into digital currencies and the tokenization of eventually everything. Trump very explicitly wants lower interest rates (and even called for negative rates during the first administration), and I believe Warsh will do that, and that this will, as I have detailed before (see below), be a deliberate act to devalue and destroy the currency and existing system, to usher in the new tokenized one on the backend to a panicked population.
Central banks, namely the Fed, are moving into their next phase of owning it all, the buyers and lenders of last resort.
Proverbs 22:7 The rich ruleth over the poor, and the borrower is servant to the lender.
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I think the CBDC is a trojan horse for what is worse a PCDC. Private Corporation Digital Currency - where there is NO congressional oversight ( but that is a low bar with these puppets anyway) Fed may be lining up to just be more like a manager for the private corporations. We will see. Hope they FAIL. Down with the tyrants!
The chicanery is off the charts with these characters! Thank you for these insights into Warsh (and what's coming). I've said it before
- ---- I appreciate your commentaries.