Author: Zhang Feng
Kevin Warsh, a Wall Street veteran who became the youngest Federal Reserve governor in history at the age of 35 in 2006, will be sworn in as the 17th Chairman of the Federal Reserve on May 22, 2026, for a four-year term. His strong opposition to central bank digital currencies (CBDCs), believing that "issuing a CBDC would be a 'bad policy choice,'" not only marks the arrival of a new leadership at the Federal Reserve that is highly skeptical of the digital dollar, but also resonates with the legislative trends in the US Congress in recent years, the executive orders of the Trump administration, and even the entire trend of financial liberalization, profoundly influencing the development of digital currencies in the United States and even globally.
Author: Zhang Feng
Warsh's view on digital finance can be summarized as a three-pronged approach: embracing technology, rejecting sovereign digital currencies, and supporting private innovation. Warsh holds a positive view of the underlying value of blockchain technology. As early as 2015, he described Bitcoin as "software…the latest, coolest software," emphasizing that its underlying code could give rise to new forms of financial intermediaries, even if Bitcoin itself might not become a stable medium of exchange. Between 2024 and 2025, his stance shifted from mere skepticism to a more pragmatic engagement, believing that central banks must actively participate in the digital asset ecosystem. At a Senate Banking Committee hearing in April 2026, he explicitly stated, "Digital assets are already part of the financial system." Financial disclosures also show that Warsh himself holds significant exposure to crypto assets, including dYdX, Polychain, Solana, and Optimism. He even gave Bitcoin an intriguing title—"monetary policeman"—believing it could provide real-time feedback on central bank policy discipline. However, this very policymaker, open to the crypto industry, holds an extremely cautious, even opposed, stance on central bank digital currencies (CBDCs). Seemingly contradictory, this is actually consistent—Wash distinguishes between: who controls the money. Technology itself is neutral, but the expansion of monetary sovereignty is cause for concern. As he emphasized at the Reagan Economic Forum, CBDCs might "suitable for regimes that want to control the people through five-year plans," but they "violate the American spirit." II. Eight Dimensions: The Deep Logic Behind Warsh's Opposition to CBDCs Dimension 1: Legal Authority – The Federal Reserve Has No Right to Issue CBDCs Warsh's primary reason for opposing CBDCs points directly to the legal roots. At the Senate confirmation hearing in April 2026, Senator Moreno directly asked Warsh, "Does the Federal Reserve have the legal authority to issue a CBDC?" Warsh's answer was unequivocal. He pointed out that the Federal Reserve lacks the legal authority to create a CBDC, describing it as a "bad policy decision." This statement echoes legislative action at the congressional level. In March 2025, Minnesota Representative Tom Emmer formally introduced H.R. 1919, the Anti-CBDC Surveillance State Act, which explicitly prohibits the Federal Reserve from issuing CBDCs or any substantially similar digital assets, and also prohibits the Federal Reserve from testing, researching, developing, creating, or implementing any CBDC. The bill further clarifies that unless explicitly authorized by Congress, the Federal Reserve has no power to issue a CBDC. Warsh's statements at the hearing were almost a direct restatement of this legislative spirit. In Warsh's own words, the widespread concern among lawmakers about financial surveillance and the expansion of central bank power is a key policy basis for his opposition to CBDCs. Dimension Two: Constitutional Privacy—A Digital Nightmare for Surveillance In Warsh's view, the core issue with CBDCs is not technology, but surveillance. This concern has reached a cross-ideological consensus between American liberals and conservatives. In July 2025, the White House Office of Management and Budget released the "H.R. 1919 Executive Policy Statement," which explicitly stated: "This legislation protects the financial privacy and constitutional freedom of every American. The United States will never allow the creation of a central bank digital currency that can be used to monitor, control, or expel U.S. citizens." The statement further emphasized that the U.S. principle is that "currency should be free from political manipulation and government surveillance." Walsh himself expressed the same concerns in more direct language. At the 2025 Reagan Economic Forum, he described the dangers of CBDCs as follows: "I can't think of anything more dangerous than having 300 million Americans have a digital wallet at the Federal Reserve. When the next crisis comes, a group of politicians might say, 'We can't give money directly to the people, how about you (the Federal Reserve) just put money into those wallets?'" He continued, "When central banks monitor all these accounts, the privacy that Americans cherish will also be questioned." The core of this statement is that CBDCs not only give the government control over every transaction record, but also open the door to "programmable money"—payment behavior can be restricted by preset conditions, and financial freedom quietly crumbles under the guise of technology.
Wash's adherence to the boundaries of the Federal Reserve's mission is another key to understanding his CBDC stance. During his confirmation hearings, he repeatedly emphasized that the Federal Reserve should "stick to its knitting" and avoid intervening in areas such as climate change and economic inclusion—specifically, "fiscal and social policies." At the Reagan Economic Forum, he further clarified: "Personally, I want it to be a focused central bank, ensuring price stability as a prerequisite for full employment, rather than getting involved in other areas." Warsh's belief is clear: the Fed's core mission is price stability and full employment, not acting as a public-facing digital wallet operator or payment service provider. The introduction of a CBDC would allow the central bank to leap directly from its traditional wholesale role to the retail level, amounting to a dangerous expansion of its functions. The concerns of the American Bankers Association echo this—they believe that retail CBDCs would allow consumers to completely bypass commercial banks, fundamentally changing the Fed's traditional role.
Wash's opposition to CBDCs is also based on his firm belief in the "private sector first" principle of the US economy.
He pointed out at the Reagan Economic Forum: "The core strength of the US economy lies in the private sector, and we absolutely do not need the central bank to further encroach on this area." This judgment is highly consistent with the US's digital finance legislation path in recent years. In July 2025, days after the US House of Representatives passed the Anti-CBDC Act, President Trump signed the GENIUS Act (Guiding and Establishing the National Innovation Act for Stablecoins), establishing a comprehensive federal regulatory framework for dollar-denominated private stablecoins. This legislative package clearly signals that the US policy direction prioritizes supporting private sector innovation while explicitly rejecting a state-issued digital dollar. This aligns perfectly with Warsh's support for integrating crypto assets into the existing financial system at the 2026 hearings, favoring market-driven innovation over central bank projects that directly compete with commercial payment systems. Data from the Boston Consulting Group confirms the rapid growth of private stablecoins: as of June 2025, the market capitalization of dollar-denominated stablecoins exceeded $250 billion, accounting for over 95% of the global stablecoin market capitalization—a market that doesn't require central bank "tickets." Dimension Five: Evolution of Stance – From Early Supporter to Explicit Opponent of the Digital Dollar Warsh wasn't always opposed to CBDCs, which ironically makes his shift in stance all the more compelling. In 2018, he published an op-ed in the Wall Street Journal, explicitly proposing a CBDC in the form of a "digital dollar" backed by the Federal Reserve. He wrote that the Fed "might carefully consider introducing its own digital currency to reap the benefits of innovation while avoiding condoning the illicit activities attracted by Bitcoin and its like." At that time, Warsh viewed CBDCs as a tool to prevent the illicit misuse of cryptocurrencies. However, between 2024 and 2025, his stance underwent a significant shift—from supporting a digital dollar to a more pragmatic and highly cautious approach. At the 2026 hearing, his statement changed from "may be considered" to a clear rejection. What drove this shift? On the one hand, privacy and surveillance issues rose to unprecedented heights on the US political agenda; on the other hand, the Trump administration explicitly prohibited federal agencies from "taking any action to establish, issue, or promote CBDCs, either within or outside the United States" through executive orders. More importantly, Warsh may have realized that the limited and constrained digital dollar envisioned in 2018, under the combined influence of political pressure and technological evolution, could easily evolve into an out-of-control surveillance tool. As the analysis by Columbia Law School points out, the very design of a CBDC would transform the Federal Reserve from a wholesale bank into a retail bank, "with access to the financial data of individual citizens." Dimension Six: Crisis Response Mechanisms – Concerns about Slow Congressional Action Warsh's opposition to CBDCs also contains a subtle but profound insight: the irreversible political logic of crises. At the Reagan Economic Forum, he vividly described this concern: "When the next crisis arrives, if Congress acts slowly and lobbying groups flood Washington, a group of politicians might say: 'We can't give money directly to the people, how about you (the Federal Reserve) just put money into those wallets?'" Once a CBDC is established, the central bank's digital wallet system becomes readily available infrastructure. In emergencies such as financial crises, pandemics, or natural disasters, Congress and the government will face immense political pressure to utilize this system to directly inject funds into citizens' accounts. This would fundamentally alter the Federal Reserve's role—from an independent executor of monetary policy to a direct agent of fiscal policy, eroding the central bank's independence like never before. This concern is not alarmist: the massive economic stimulus programs implemented by governments worldwide during the COVID-19 pandemic demonstrate that directly delivering funds to citizens' accounts is already a fait accompli; and once CBDCs exist, this demand will inevitably be channeled through this channel. The Regulatory Review, in its analysis of the Anti-CBDC Act, also points out that the act effectively "limits the government's monetary policy flexibility during crises, when direct digital transfers may be crucial for economic stability"—and Warsh argues that this very "flexibility" is the real source of danger.
Wash's Wall Street experience—working in Morgan Stanley's M&A department and serving as a key liaison between the Federal Reserve and banks during the 2008 financial crisis—gave him a firsthand understanding of the complexities of the financial system.
In his view, CBDC is not just a matter of currency issuance, but a systemic challenge involving multiple areas such as payment systems, bank regulation, anti-money laundering, and consumer protection. The American Bankers Association explicitly stated that retail CBDC "may undermine the stability of credit intermediation by allowing direct federal deposits and could trigger disintermediation during periods of financial stress." The Federal Reserve's own research also acknowledges that CBDCs may bring risks of bank disintermediation and related bank credit contraction, as well as potential adverse effects on financial stability. Warsh's opposition largely stems from a clear understanding of these systemic risks—before introducing a completely new form of central bank liability, it is essential to fully assess how it interacts with the existing two-tier banking system and how to avoid shocking credit supply. Dimension Eight: Geopolitical Considerations—The Double-Edged Sword Effect of “Dollar Weaponization” Warsh once viewed CBDCs as a geopolitical tool to maintain the international status of the dollar—in 2022, he even wrote an article in the Wall Street Journal, with the core demand being to consolidate the dollar's global dominance in response to the global trend of digital currency development. However, by 2026, his stance had undergone a fundamental shift. Behind this shift lay his profound concern about the potential backlash from the weaponization of the dollar. In Warsh's view, if the US issues a CBDC and uses it as an international payment and sanctions tool, other countries would be more motivated to accelerate "de-dollarization," turning to alternative payment systems and central bank digital currency arrangements. As analyzed by the Harvard Kennedy School, the US digital asset strategy (banning CBDCs and supporting private stablecoins) has the intention of maintaining the international status of the dollar, but it also carries the risk of financial instability. Warsh's view contrasts sharply with this: rather than allowing central bank CBDCs to become tools of geopolitical games, it is better to allow privately issued dollar stablecoins to naturally expand their international influence through market competition. His assessment of China's digital yuan further confirms this logic—in Warsh's view, China's latest adjustments to the digital yuan have made it "no longer a CBDC in the traditional sense," and the digital yuan "threatens the dominance of the dollar." This reinforces his belief that geopolitical confrontation does not need to be, and should not be, achieved through the issuance of CBDCs. Regarding financial stability, it may create systemic risks of bank disintermediation. One of Warsh's most prominent considerations in opposing CBDCs is the protection of the banking intermediation system. Internal research literature from the Federal Reserve indicates that the introduction of retail CBDCs could have a profound impact on the banking system and financial stability. As a digital central bank liability, CBDCs can be used by households and non-financial enterprises for payments or savings. If a risk-free, readily available digital dollar tool becomes widespread, the likelihood of a large-scale flow of deposits from commercial banks to the Federal Reserve will significantly increase. This "disintermediation" effect will force banks to reduce lending or seek more expensive and unstable funding sources, potentially even triggering a credit freeze in extreme scenarios. This is precisely the source of the American Bankers Association's concerns. The Federal Reserve's own empirical research has also found that the stock market's reaction to US banks' announcements of their intention to launch a CBDC is indeed negatively correlated with the banks' deposit dependence—the capital market itself is voting with its feet, believing that CBDC poses a more serious threat to small and medium-sized banks with high deposit dependence. Warsh's opposition actually reflects a prudent risk management logic: CBDC should not be rushed before the financial stability risks under extreme scenarios have been fully assessed. For financial innovation, this could stimulate the release of vitality in the private sector. Regarding financial innovation, Warsh's stance and the current policy path form an American-style dialectic—exchanging "not doing something" (not issuing CBDC) for "doing something" (developing private stablecoins). The three virtual asset bills passed by the US Congress in 2025—the Anti-CBDC Act, the GENIUS Act, and the CLARITY Act—constitute the most systematic digital asset regulatory framework globally. Their core logic is to support a strategic shift towards privately issued stablecoins, forming a "private version of the digital dollar." Warsh himself has explicitly stated his support for accelerating the final legislation of the CLARITY Act. The advantage of this path is that financial innovation is market-driven and competition-driven, rather than government-designed. The market capitalization of dollar-denominated stablecoins has exceeded $250 billion and is growing rapidly, demonstrating that the private sector is fully capable of effective innovation in this area. Warsh's opposition to CBDCs essentially clears the way for institutional competition from central banks to facilitate this market-driven innovation path. As he stated, fintech development should be market-led, not a central bank project directly competing with commercial payment systems. This creates a duality in terms of financial security: state control and geopolitical competition. Warsh's opposition to CBDCs presents a subtle tension in the dimension of financial security. On the one hand, prohibiting CBDCs can prevent central bank digital wallet systems from becoming tools for "monitoring the state," protecting citizens' financial privacy and constitutional freedoms. On the other hand, abandoning the digital dollar could place the United States in a relatively passive position in geopolitical competition in the digital economy era. More than 130 countries (representing 98% of global GDP) are actively exploring or piloting CBDCs, and China's digital yuan has processed a cumulative total of 3.48 billion transactions, amounting to 16.7 trillion yuan. However, Warsh and US policymakers did not respond by "catching up," but by "finding another way" by banning CBDCs. After the GENIUS Act was signed in July 2025, the combination of the Anti-CBDC Act and the GENIUS Act created a unique "dual-dollar" structure—the Federal Reserve dollar and the stablecoin dollar developed in parallel and began institutional competition, hoping that private stablecoins could maintain the dollar's dominance while avoiding the risk of state surveillance. Whether this strategy can effectively counter the offensive of China's digital yuan remains to be seen. But Warsh seems to believe that using an open, competitive, and decentralized dollar stablecoin ecosystem to counter a state-led digital yuan system is a more suitable option for US values and long-term interests. IV. Impact on Relevant Policies in China and Europe Impact on China: Accelerating Institutional Competition and Strategic Response. The formal inauguration of Warsh as Chairman of the Federal Reserve, coupled with the passage of legislation such as the Anti-CBDC Act and the GENIUS Act in the United States, effectively constitutes a powerful response to China's digital yuan strategy. China's digital yuan has completed its upgrade from "digital cash 1.0" to "digital deposit 2.0," with a cumulative transaction amount reaching 16.7 trillion yuan, and is promoting the cross-border payment application of the digital yuan through multilateral platforms such as mBridge. However, the US response is not to imitate the Chinese model, but rather to adopt a completely different strategy—rejecting CBDCs and embracing private stablecoins. This "institutional competition" raises a fundamental question: in the global digital currency race, is the digitalization model of national sovereign currencies superior, or is the market-driven model dominated by the private sector more advantageous? For China, the US policy orientation under Warsh's leadership presents a dual challenge. On the one hand, the global expansion of dollar stablecoins may erode the internationalization space of the digital yuan; on the other hand, China needs to continuously optimize the economic design of the digital yuan (e.g., whether to pay interest on the digital yuan) to enhance its competitiveness. Warsh pays particular attention to the new function of the digital yuan paying interest to holders, believing that this function "threatens the dominance of the dollar"—showing that he is scrutinizing every detail of the development of global central bank digital currencies with extremely keen insight. Impact on Europe: Difficult choices amidst strategic uncertainty. Compared to the United States, Europe's path to a digital euro has reached a more delicate crossroads. Piero Cipollone, a member of the European Central Bank's Executive Board, pointed out that a digital euro, as a digital form of cash issued by the ECB, would ensure that Europeans have access to a free and widely accepted digital payment tool under any circumstances. The European Council has also reached a consensus on a new negotiating position for a digital euro, supporting a proposal that includes both online and offline functionality. However, the United States' strategic choice—rejecting CBDCs and embracing private stablecoins—may trigger profound divisions in Europe. Eurozone policymakers will have to answer a series of thorny questions: If the US dollar chooses the private stablecoin path, is a digital euro still necessary? Faced with the penetration of US dollar stablecoins such as USDC and USDT in the Eurozone, should Europe issue its own central bank digital currency to defend its monetary sovereignty, or follow the US path of private cryptocurrencies? This dilemma has been described by some European observers as "strategic confusion"—the US choice has forced Europe to re-examine its digital currency policy, while Europe can neither fully replicate the US's "stablecoin-first" path (lacking a private stablecoin ecosystem of the same scale) nor ignore the privacy and power expansion risks that CBDCs may bring. The European Central Bank emphasizes that the digital euro will provide stronger privacy protection than existing private payment instruments, which to some extent reflects Europe's efforts to find a balance between CBDCs and privacy protection. However, Warsh's sharp question—"When central banks monitor all these accounts, privacy will be questioned"—also applies to Europe. V. Is it possible for the US CBDC policy to shift again? Under the current political and legislative environment in the US, the possibility of a fundamental shift in Warsh's and the US's attitude towards CBDCs in the short term is extremely low. From a legal perspective, the Anti-CBDC Surveillance Act explicitly prohibits the Federal Reserve from issuing CBDCs unless Congress reauthorizes them; from a political perspective, bipartisan concerns about financial privacy and the expansion of central bank power are deeply rooted; from an ideological perspective, Warsh himself has shifted from early support to staunch opposition, with the core logic being to defend market dominance and prevent state surveillance. These factors reinforce each other, forming a stable policy loop. However, in the long run, the window for a shift is not completely closed. First, although current US policy is predominantly against CBDCs, there are still voices of support that cannot be ignored. Former CFTC Chairman Christopher Giancarlo co-founded the "Digital Dollar Project" and has repeatedly written articles emphasizing the crucial role of a digital dollar in maintaining the dollar's long-term international reserve status. Former Federal Reserve Governor Lael Brainard, during her tenure, explicitly stated that the United States should not "fall behind history" in the face of China's rapid advancement of its digital yuan. Former Treasury Secretary Lawrence Summers has also publicly supported the prudent exploration of CBDCs, believing they could provide a secure public payment infrastructure and compensate for the shortcomings of private stablecoins in terms of privacy and regulatory coverage. At the congressional level, Democratic Representative Jake Auchincloss introduced the Digital Dollar Act, advocating for legislative authorization and the embedding of privacy-protecting features. In academic research, multiple white papers published by the MIT Digital Currency Initiative (MIT DCI) point out that CBDCs can help improve the efficiency of cross-border payments and promote financial inclusion. Supporters generally believe that the United States should avoid the risks of surveillance and power expansion through clear legislation and sophisticated design, rather than simply banning them. Secondly, Warsh's eight reasons for opposing CBDCs are not insurmountable. Legal authority can be granted by Congress through separate legislation, and technical concerns about "surveillance by the state" can be mitigated through offline wallets, privacy encryption, and other means. The expansion of central bank functions can be clearly defined through legislation, complementing rather than replacing private stablecoins. The risks of fiscal intervention during crisis response can be constrained by setting emergency trigger clauses and independent oversight mechanisms. Regarding geopolitical competition, the United States can adopt a "public-private partnership" strategy, developing compliant stablecoins while retaining a limited option for a digital dollar. Regulatory complexity and bank disintermediation issues can be mitigated through tiered design, holding limits, and no-interest loans. Ultimately, these obstacles reflect current political will rather than ultimate technological or legal bottlenecks. Furthermore, factors that could trigger a policy shift could occur at any time. The triggering factors may come from three aspects: First, if the international status of the US dollar is significantly weakened due to the widespread application of CBDCs in other countries (such as the digital yuan), Congress may reassess the strategic necessity of a digital dollar; second, if private stablecoins experience major risk events (such as large-scale de-pegging or money laundering scandals), market trust in the "private version of the digital dollar" may collapse, forcing governments to seek public solutions; third, in a major financial crisis, if CBDCs prove to be a more efficient policy transmission tool, crisis politics may outweigh privacy concerns.
Brainard says if crypto remains unregulated as it is integrated into the larger financial system, it will bring risks of instability of the type currently being seen.
CointelegraphThe Fed vice-chairman told the U.S. House of Representatives Financial Services Committee that a CBDC would provide stability and interoperability in an increasingly complex economic system.
CointelegraphThe Fed vice chair told the House Financial Services Committee that a CBDC offers stability, interoperability in increasingly complex economic system.
CointelegraphIn a 52–43 vote on the Senate floor on Tuesday, U.S. lawmakers confirmed Lael Brainard as vice chair of the Federal Reserve System for four years.
Cointelegraph