Fed Releases Report On the Digital Dollar
Main page Economics, US, Cryptocurrency
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Jan. 21, 2022

The US Federal Reserve (Fed) has just presented a report on the results of the central bank's digital currency study (CBDC). According to it:

"The digital dollar could fundamentally change the structure of the US financial system, altering the roles and responsibilities of the private sector and the central bank."

At the same time, the document does not include conclusions on the need for its launch. The Fed believes that the final decision should be made by the US Congress.

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The Fed has noted that the emergence of a digital form will allow the dollar to maintain its status as the leading currency in global finance against the background of the emergence of competitors and cryptocurrencies. The CBDC will also improve cross-border payments, increase access to financial services and facilitate the use of the dollar in new technologies.

Among the potential negative consequences, the Fed has cited deposit outflows from lending institutions and more severe damage from a "financial panic."

The Fed has also highlighted the privacy issue due to the fact that the government will gain access to the transactions of individual citizens. In this case, "any CBDC would need to strike an appropriate balance, however, between safeguarding the privacy rights of consumers and affording the transparency necessary to deter criminal activity."

In addition, the issuance of a digital dollar could attract attackers because of the "extremely complex" infrastructure compared to existing payment systems.

Fed officials will consider banks and non-banks as intermediaries to provide accounts and facilitate CBDC payments.

The Fed chief Jerome Powell has previously noted it is important for the US to issue CBDC not first, but to do so with the right approach.

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