US Federal Reserve opens CBDC discussion

The Federal Reserve Board has released a discussion paper examining the potential benefits and risks of a US central bank digital currency (CBDC).

The highly anticipated move marks the first step by the US central bank in exploring the possibilities of a digital currency.

"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.

The bank says that while a CBDC could provide a safe, digital payment option and may result in faster payment options between countries, “there may also be downsides”.

These include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other concerns that the Federal Reserve cited include working out how to preserve the privacy of citizens and maintain the ability to combat illicit finance.

The paper summarises the current state of the US domestic payments system and looks at the different types of digital payment methods and assets that have emerged in recent years, including stablecoins and other cryptocurrencies. It concludes by examining the potential benefits and risks of a CBDC and identifies specific policy considerations.

The discussion paper invites comment from the public and is accepting comments for the next 120 days.

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