Fed kicks off debate on issuing its own digital currency with new white paper

economictimes.indiatimes.com:

Federal Reserve said in a long-awaited discussion paper released on Thursday. The paper made no policy recommendations and offered no clear signal on where the Fed stands on whether to launch a central bank digital currency (CBDC), a digital form of cash in your pocket. The Fed said it would not proceed with creating one «without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.» The paper tiptoes around a subject that has sparked debate inside the Fed's top ranks, even as other central banks across the globe are exploring the adoption of digital currencies.

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Nevertheless, it sets the stage for the central bank to collect public feedback on the potential costs and benefits of a CBDC, which could ultimately advance legislation long-term. «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,» Fed officials wrote. Challenges include maintaining financial stability and making sure the digital dollar would «complement existing means of payment,» the Fed said. The central bank also needs to tackle major policy questions such as ensuring a CBDC does not violate Americans' privacy and that the government maintains its «ability to combat illicit finance.» Unlike cryptocurrencies, which are typically run by private actors, a CBDC would be issued and backed by the central bank. It would differ from electronic transactions that