Fed releases report on the digital dollar

The United States Federal Reserve System (the Fed) presented a report on the results of studying the national digital currency (CBDC). In the 40-page document there are no conclusions about the need for its issuance.

The regulator reaffirmed the view that the final decision should be taken by Congress. No specific timeline was given. Previously, Fed Chair Jerome Powell noted that for the United States it is not about being first to issue a CBDC, but to do so with the right approach.

According to Bloomberg, in February the ФРБ of Boston will publish a separate report on the technical aspects of the digital dollar.

Public discussions will run until May 20.

«The digital dollar could fundamentally transform the U.S. financial system, reshaping the roles and responsibilities of the private sector and the central bank», — the document says.

The Fed noted that the introduction of a digital form would allow the dollar to retain its status as a key currency in global finance amid the emergence of competitors and cryptocurrencies. A CBDC would also improve cross-border payments, broaden access to financial services, and facilitate the use of the dollar in new technologies.

Among potential downsides of the CBDC, it cited outflows of deposits from banks and a more severe hit from a “banking panic.”

The Fed also flagged privacy concerns regarding government access to the transactions of individual citizens. In this case, “a balance will have to be found between protecting consumers’ right to privacy and ensuring conditions to prevent criminal activity,” the document says.

The issuance of the digital dollar could attract criminals due to its “extremely complex” infrastructure compared with current payment services.

The Fed will consider banks and non-bank organizations as intermediaries to provide accounts and facilitate CBDC payments.

Earlier, Congressman Tom Emmer introduced a bill prohibiting the Fed from opening retail accounts for the digital dollar. He had previously urged excluding from the CBDC’s design the ability to monitor citizens.

Earlier, American lawmakers expressed concerns about lagging behind China in the development of a digital currency. Fed experts called cryptocurrencies one of the potential threats to the dollar’s hegemony in the long term.

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