The creation of a central bank digital currency (CBDC) presents “significant risks” for the financial system and consumer privacy, says Federal Reserve Governor Michelle Bowman.

Appearing at a Harvard Law School Program on International Financial Systems roundtable on Oct. 17, Ms. Bowman conceded that the benefits of a digital dollar are uncertain and that there could be “unintended consequences” for the banking sector.

“The potential benefits of a U.S. CBDC remain unclear, and the introduction of a U.S. CBDC could pose significant risks and tradeoffs for the financial system,” she said in prepared remarks.

“These risks and tradeoffs include potential unintended consequences for the U.S. banking system and considerable consumer privacy concerns.”

Ms. Bowman, who is one of seven Federal Reserve Board members overseeing domestic payments systems and banking, averred that she has not come across a “compelling argument” that a CBDC could solve issues surrounding frictions within payment systems, advance financial inclusion, or offer the public access to safe central bank money.

She did agree that the Fed needs to continue researching the subject and obtain greater insights into a digital dollar’s technical capabilities and risks associated with CBDCs.