The Federal Reserve Board has released the long-awaited white paper of its own digital currency but remains non-committed on whether it would launch a CBDC or not. The central banking system has solicited public comments on the matter.
Right off the bat, the Fed said that this report is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a U.S. CBDC.”
Throughout the 40-page report, the Fed remained vague about its views on CBDC and traversed through various pros and cons of the subject matter. The paper argued that while a CBDC could offer a safe and fast digital payment option for households, businesses, and countries across the world, it has its downsides as well.
“A CBDC could also pose certain risks and would raise a variety of important policy questions, including how it might affect the financial-sector market structure, the cost and availability of credit, the safety and stability of the financial system, and the efficacy of monetary policy,” the report read.
One of the differences Fed pointed out in its report was that a digital currency would be a liability of the Federal Reserve, not of a commercial bank. Therefore, the Fed wouldn’t pay interest on money stored with it.
The white paper pointed out that the dollar is now the world’s most widely used tool for payments and investments, as well as an international reserve currency. This high penetration rate gives the US the power to influence the “standards for the global monetary system,”
However, it added:
“It is important, however, to consider the implications of a potential future state in which many foreign countries and currency unions may have introduced CBDCs. Some have suggested that, if these new CBDCs were more attractive than existing forms of the U.S. dollar, global use of the dollar could decrease – and a U.S. CBDC might help preserve the international role of the dollar.”
The Federal Reserve has called for feedback on the report, asking public comments on more than 20 questions. The public will have 120 days to comment on the matter.
Interested readers can read the report here.