The Federal Reserve issued its long-awaited digital assets report on the status of its research on whether the U.S. should issue a digital currency. It isn’t a story that makes for exciting headlines, but it’s all good: The Fed released the report, it’s designed to create discussion, and any decision will rest with Congress.
American Banker headlined its report, “Fed defers to elected officials on issuing digital currency.” The Independent Community Bankers of America (ICBA) lauded the Fed’s stance, saying, “The Fed’s discussion paper rightly acknowledges many important policy considerations, such as preserving private-sector intermediaries, balancing consumer privacy with transparency, ensuring transferability between customers of different intermediaries, and supporting compliance with anti-money-laundering and anti-terrorist-financing rules.”
The New York Times noted in its headline that the report “opens debate over a U.S. central bank digital currency.” Reuters followed the Times’ lead.
As the Fed put it, “The introduction of a CBDC would represent a highly significant innovation in American money. Accordingly, broad consultation with the general public and key stakeholders is essential. This paper is the first step in such a conversation. It describes the economic context for a CBDC, key policy considerations, and the potential risks and benefits of a U.S. CBDC. It also solicits feedback from all interested parties.
“The Federal Reserve does not intend to proceed with issuance of a CBDC without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
The report gives a good overview of risk and benefits of a digital dollar, which sounds like it would mimic existing electronic funds transfers: “While no decisions have been made on whether to pursue a CBDC, analysis to date 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.”