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US Fed Publishes Paper on a Digital Dollar

Categories : Cash ensures competition among payment instruments, Cash has legal tender status, Cash protects privacy and anonymity
January 24, 2022
Tags : CBDC, Federal Reserve, US
The Federal Reserve has been investigating the implications and the key conceptual models for a Central Bank Digital Currency (CBDC). The paper is a first step in recognising the benefits and risks of a CBDC and fostering a broad and transparent dialogue with the public.
Guillaume Lepecq

Chair, CashEssentials

This post is also available in: Spanish

Like many other central banks – and other stakeholders such as the British House of Lords – the Federal Reserve has been studying the opportunity and feasibility of a digital dollar. According to the Atlantic Council CBDC tracker, CBDCs have been launched in 9 countries, including the Bahamas’ sand dollar, the Nigerian e-Naira launched in October 2021, and DCash launched in 7 of the eight countries of the Eastern Caribbean Central Bank. Another 14 countries are currently running pilots, including Anguilla, China, Jamaica, Hong Kong, Lithuania, Malaysia, Saudi Arabia, Singapore, South Africa, South Korea, Sweden, Thailand, and the United Arab Emirates.

Examining the Positives and Negatives

The long-awaited discussion paper makes no policy recommendations and offers no clear signal of whether the Fed will effectively launch a form of CBDC. It states that “The Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”

Complementing (Rather than Replacing) Current Forms of Money

The paper does summarise some of the critical objectives of a future digital dollar. This includes:

The paper also provides some high-level design features of a CBDC.

Engaging with Stakeholders

The Fed calls for public comments on the CBDC over the next 120 days. No decisions have been made about how a digital currency would be structured or if it will be rolled out. “While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides,” the Fed said.

“We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States,” Federal Reserve Chair Jerome H. Powell said.


This post is also available in: Spanish