The Federal Reserve released a long-awaited review of the potential for creating a central bank digital currency Thursday, after months of delays. Ahead of making a decision, the Fed has asked the public to submit answers on 22 questions posed in the report.
“The introduction of a CBDC would represent a highly significant innovation in American money,” the authors said in the report. “This paper is the first step in a public discussion between the Federal Reserve and stakeholders about CBDC.”
Many in the industry have called for the creation of a U.S. CBDC, saying it could take the place of dollar-linked stablecoins and help connect fiat and crypto transactions. China has created its own CBDC, the digital yuan or e-CNY, and some observers suggest the U.S. needs its own to stay competitive and maintain the dollar’s dominant role in the world financial system.
The Fed report notes that the creation of a CBDC will seek to complement current financial systems, not replace them. Any digital currency the central bank issued would have to protect consumer privacy while supporting faster and cheaper payments. However, a CBDC would also pose risks for current monetary regulations and could have large effects on the structure of financial markets.
While the report didn’t take a position on whether the Fed should create a digital currency, the prospect of a U.S. CBDC has drawn both criticism and support from government leaders.
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