WASHINGTON–The benefits and potential risks of a U.S. central bank digital currency (CBDC) are the subject of a new discussion paper released by the Federal Reserve, which is seeking public comment on the issue.
According to the Fed, the new paper is a “first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system,” and added it was taking no policy position on an issue that has already received scrutiny from some in Congress.
“We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States,” said Federal Reserve Chair Jerome H. Powell in a statement accompanying the release of the paper.
The paper addresses a range of issues, including the state of the domestic payments system and different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies.
Questions Being Explored
In addition, the paper also analyzes potential benefits and risks of a CBDC and identifies specific policy considerations, the Fed said. Among the issues explored:
- Whether a CBDC negatively or positively affects financial stability
- Whether a CBDC could adversely affect the financial sector differently from stablecoins or other nonbank money
- Should a CBDC be legal tender
- Should it pay interest
- What types of firms should serve as intermediaries for CBDCs
- What should be the role and regulatory structure for the intermediaries.
“Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance,” the Fed stated
The comment period will be 120 days.