Credit union and banking trade groups have released a joint letter to the chair and ranking member of the House Financial Services Committee, warning of "devastating consequences" if the Federal Reserve moves forward with a Central Bank Digital Currency (CBDC). The letter was sent on May 25, one day before the Committee convened a hearing on "Digital Assets and the Future of Finance: Examining the Benefits and Risks of a U.S. Central Bank Digital Currency." That hearing took testimony from only one witness, Lael Brainard, the Vice Chair of the Federal Reserve.

The fact that credit unions, which frequently serve unionized labor, joined with banking trade groups to sign off on the letter, lends credibility to the "devastating consequences" the letter enumerates of a Central Bank Digital Currency.

A CBDC would allow the Federal Reserve to compete for deposits with credit unions and banks. The letter correctly assesses the downside of such a move as follows:

"Private money is created through financial intermediation by banks and credit unions– the process in which financial institutions take deposits and lend out and invest those deposits. Private money is used by financial institutions to provide funding for businesses and consumers and thus supports economic growth. Introducing a CBDC would be a deliberate decision to shift some volume of private money to public money, with potentially devastating consequences for the cost and availability of credit for consumers and businesses. In sum, the savings of businesses and consumers would no longer fund the assets of banks – primarily, loans – but instead would fund the assets of the Federal Reserve – primarily securities issued by the Treasury Department, Fannie Mae, and Freddie Mac."