The document makes no monetary policy recommendations and does not offer a clear signal about the Fed’s position regarding the possibility of launching a central bank digital currency (CBDC, for its acronym in English). What’s more, The body said it would not proceed to create one “without clear support from the executive branch and from Congress, ideally in the form of a specific authorization law.”
But it lays the groundwork for the central bank to seek public input on possible costs and benefits of this approach, that the world’s major economies are increasingly exploring.
“While a CBDC could provide a secure digital payment option for households and businesses as the payment system continues to evolve, and could result in faster payment options between countries, there may also be downsides,” Fed officials wrote in the report.
Challenges include maintaining financial stability and the guarantee that the digital dollar “will complement existing means of payment”, the Fed said.
The central bank must also address important policy issues before embarking on a CBDC, such as ensuring that it does not violate Americans’ privacy and that the government maintains its “ability to combat illicit finance”.
Although it makes no recommendations, the document sheds some light on how a CBDC might work in practice.
One of the main conclusions of the analysis was that A CBDC would be “better suited” to America’s needs if it were “brokered” through the current financial system, meaning individuals would not hold CBDC accounts directly with the Fed.
However, officials said they are not ruling anything out. The document, which was announced last year by Fed Chairman Jerome Powell, outlines the payments landscape, including the emergence of stablecoins and other cryptocurrencies.
“The document is not intended to advance any specific outcome, nor is it intended to indicate that the Federal Reserve will make any imminent decision on whether to issue a US CBDC,” holds the writing.
Powell has made it clear that he would like such a bill to have broad support and, ideally, to be the product of congressional action. The Fed board is generally divided on the need for a CBDC.
Unlike cryptocurrencies, which are often managed by private actors and can suffer from volatile price swings, a CBDC would be issued and backed by the central bank.
It also differs from daily electronic cash transactions through large commercial banks in that it could give consumers a direct claim to the central bank, similar to that of physical cash.
The document released Thursday is separate from research in which the Boston Fed has been working with the Massachusetts Institute of Technology to explore the technological aspects of a CBDC. That technical research, including coding that could be used for a potential US CBDC, is due out next month.
Source From: Ambito
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