Fed releases long-awaited study on a digital dollar, but doesn't take a position yet on creating one
The Federal Reserve on Thursday released its long-awaited study of a digital dollar, exploring the pros and cons of the much-debated issue and soliciting public comment.
Billed as «the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies,» the 40-page paper shies away from any conclusions about a central bank digital currency. The report originally was expected in the summer of 2021, but had been delayed.
Instead, it provides an exhaustive look at benefits such as speeding up the electronic payments system at a time when financial transactions around the world already are highly digitized. Some of the downside issues the report discusses are financial stability risks and privacy protection while guarding against fraud and other illegal issues.
«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 states.
Fed Chairman Jerome Powell has been largely non-committal in his public comments on the CBDC. The concept's biggest advocate is Fed Governor Lael Brainard, who has been nominated to be vice chair of the policymaking Federal Open Market Committee.
Several other Fed officials have voiced skepticism over the digital dollar, saying that the benefits are not obvious.
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.
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