In a long-anticipated review paper on 20 January, The Federal Reserve finally did a risk-benefit assessment of issuing a U.S. official digital currency wherein they stated that, ‘creating an official digital version of the US dollar could give Americans more, and speedier, payment options, but it would also present financial stability risks and privacy concerns.’
Taking A Neutral Stance
Just as MoneyControl told, the subject sparked debate inside the Fed’s top ranks for officials were divided on the issue, and the Fed steered clear of taking any sides in its report, simply putting forward the arguments for and against the launch of a central bank digital currency (CBDC).
The Fed stated it would not proceed with creating one “without clear support from the executive branch and from Congress, ideally in the form of a specific authorizing law.”
Has the Federal Reserve decided to create a CBDC? The Federal Reserve issued discussion paper as first step in fostering broad, transparent public dialogue on CBDCs, potential benefits/risks of U.S. CBDC.— Federal Reserve (@federalreserve) January 20, 2022
For more:https://t.co/kCxBS5OyHO https://t.co/NS1GVX1Fqp pic.twitter.com/qdcMxTw217
Jerome H. Powell, the Fed chair, previewed that a report would be forthcoming in May 2021: The New York Times reports. “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,” Mr. Powell said in his statement.
In spite of not taking a side, the review does map out a method for the central bank to collect public feedback and comments on said report for the next 120 days, via an online form. This would help facilitate the long-term advancement of this legislation.
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Challenges To Be Confronted
The officials also wrote that maintaining financial stability whilst making sure the digital dollar would “complement existing means of payment” is one of the many speedbumps that they’d have to face on the road to the creation of a CBDC. Others include preventing the CBDC from causing any breaches in the Americans’ privacy as well as preserving the government’s “ability to combat illicit finance.”
Jerome Powell also advocated for retaining caution on the matter, remarking that it’s more important to get the digital dollar right that to be the first to market, partly due to cognizance of the dollar’s vital global role.
He has clarified that at a Sept. 22 press conference that they would only consider issuing a so-called central bank digital currency—or CBDC—if they believed there were “clear and tangible benefits that outweigh any costs and risks,” according to The Wall Street Journal.
CBDC Considerations In The Works For Several Others
From the Bahamas to Sweden and China, about 90 countries are exploring or launching their own CBDCs, as per the Atlantic Council. Many countries are experimenting with digital currency offerings, despite their high-risk possibilities in disrupting the entire global financial system.
Regardless, breakneck & speedy innovations amid this ever-expanding private sector has compelled key financial regulators (like the Fed) to take the initiative to integrate into this budding blockchain tech fueled industry.