Fed Releases Long-Awaited Study On a Digital Dollar
“A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank,” the report says. One primary difference between the Fed’s dollar and other digital transactions is that current digital money is a liability of commercial banks, whereas the CBDC would be a Fed liability. Among other things, that would mean the Fed wouldn’t pay interest on money stored with it, though because it is riskless some depositors may prefer to keep their money with the central bank.
The paper lists a checklist of 22 different items for which it is soliciting public feedback. There will be a 120-day comment period. Fed officials say the report is the first step in an extensive process but there is no timetable on when it will be wrapped up. The paper released Thursday notes that the Fed’s “initial analysis suggests that a potential U.S. CBDC, if one were created, would best serve the needs of the United States by being privacy-protected, intermediated, widely transferable, and identity-verified.” However, the report also states that it “is not intended to advance a specific policy outcome and takes no position on the ultimate desirability of” the digital dollar. The report notes that the speed of the project is not a top priority. Instead, the authors of the report are focused on getting it right. “The introduction of a CBDC would represent a highly significant innovation in American money,” the report says. “Accordingly, broad consultation with the general public and key stakeholders is essential. This paper is the first step in such a conversation.”
The Fed also said that it will not proceed without a clear mandate from Congress, preferably in the form of “a specific authorizing law.”
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