Fed Paper on US Central Bank Digital Currency (CBDC)

investopedia.com:

The Federal Reserve Board (FRB) released a discussion paper on Jan. 20, 2022, that looks into the pros and cons of creating a central bank digital currency (CBDC) for the United States. The paper invites comment from the public and does not favor any particular policy outcome. The Fed indicates that the paper is simply an initial step in determining whether and how a CBDC could improve the domestic payments system while keeping it safe and effective.

«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 in the accompanying press release. The paper solicits public comment on more than 20 questions. The period for submitting comments extends for 120 days.

The paper looks into the current state of the domestic payments system and various digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies.

It also notes that, prior to these developments, money already was being held and transferred in digital forms, through bank accounts, online transactions, and payment apps. These forms of money are liabilities of private entities, such as commercial banks. However, a CBDC would be a liability of a central bank, in this case the U.S. Federal Reserve System (FRS).

The paper indicates that the Fed has studied the possibility of creating a U.S. CBDC for several years. It notes that, among other things, if a U.S. CBDC is created, it should:

The Fed also indicates that a CBDC must be intermediated (the private sector, not the Fed, would offer accounts or digital wallets to facilitate