The development and enablement of a central bank digital currency (CBDC) for use by the general public is among the technological advances being explored by the Federal Reserve, the agency’s board chair said in a video message Thursday.
In fact, the agency plans to publish a “discussion paper” this summer that will delve into the implications of digital payments – including possibly a U.S.-issued digital currency.
Board Chair Jerome H. (“Jay”) Powell said the key focus for the Fed is whether or how a CBDC could improve on what he called the existing “already safe, effective, dynamic, and efficient U.S. domestic payments system” in serving households and businesses.
In any event, Powell said the Fed does not see digital currencies as a replacement for cash and coin – at least for now.
“We think it is important that any potential CBDC could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollar, such as deposits at commercial banks,” Powell said. “The design of a CBDC would raise important monetary policy, financial stability, consumer protection, legal, and privacy considerations and will require careful thought and analysis – including input from the public and elected officials.”
Powell said the discussion paper scheduled for publication this summer on implications of digital payments will have a particular focus on the possibility of a U.S. central bank digital currency. He said the paper will complement Fed research already proceeding.
In a release, the Fed said it is focused on “better understanding the full set of opportunities and risks associated with new digital payment mechanisms.” The Fed said even more projects – focused on specific technological tools and infrastructures – are underway at the Fed and the Federal Reserve Bank of Boston. The Fed is also, it said, collaborating with the Bank for International Settlements’ CBDC coalition.