FED is going to review potential implementation of CBDC in the U.S.
The US Federal Reserve has released plans to launch a review of the risks and rewards of issuing a US digital currency, or central bank digital currency (CBDC), following the current global trend, reports WSJ . Previously, Hong Kong released one of the first technical whitepapers for its CBDC.
Although the review process has been launched, the final decision may not be finalized any time soon as officials remain divided on the matter. In contrary to private cryptocurrencies similar to Bitcoin and Monero, the country’s CBDC will be fully backed by the central bank, a government entity just like the actual paper currency.
The implementation of the “Fed digital dollar” could be a solution for a faster and cheaper way to move money. The government will be able to distribute financial aid to people that do not have a bank account or are unable to receive money in the traditional way.
Fed Chairman Jerome Powell said the regulator was eager to create a safer and more stable solution rather than being one of the world’s premier issuers. The chairman’s concern is tied to the critical role of the dollar as a global currency.
Powell and other Fed officials said the review would be early and would focus on whether the country should even consider it as an option. The commission’s goal is to weigh in on the issue and determine whether it has clear and tangible benefits over the risks and costs that come with future development.
The review process will begin with the publication of an analysis on the issue and the solicitation of public opinion. But this is unlikely to include policy recommendations.
Advocates of the CBDC generally note two main advantages of digital currencies: improved speed and security. The flexibility of CBDCs allows for the implementation of monetary policies that include the manipulation of interest rates directly on CBDC holders’ accounts.
