In its research on central bank digital currencies or CBDCs, United States Federal Reserve published a new review on 9 November exploring the potential impact of a digital dollar on commercial banking and monetary policy.
Titled “Central Bank Digital Currency: A Literature Review,” the report highlights how the central bank can use CBDC as a means for consumer adoption, financial stability, and the resulting welfare implications. In it t Fed economists Francesca Carapella and Jean Flemming write:
From a theoretical standpoint, the introduction of a central bank digital currency (CBDC) raises long-standing questions relating to the provision of public and private money […] and the ability of the central bank to use CBDC as a means for transmitting monetary policy directly to households.
The models and assumptions in the literature also provide frameworks to understand effects of CBDC at the micro- and macro-levels. The report also mentions the “intrinsic features of CBDC” which the authors believe was a crucial question to tackle moving forward:
As with any new literature, many questions remain. We believe the most crucial question is which intrinsic features of CBDC as a means of payment and a store of value are important for households’ portfolio choices as to which monies to use.