The US Federal Reserve has stated officially that it is considering a central bank digital currency (CBDC). According to the central bank, it has not yet decided on pursuing or implementing a digital dollar.
The Fed, however, has previously released a CBDC report that stressed the use of stablecoins such as USD Coin and Tether; the Thursday announcement is the most significant to date.
Fed Exploring CBDC “Benefits and Risks”
The authority said in a Tweet today that it is exploring the potential benefits and risks of CBDCs.
Why is the Federal Reserve considering a #CBDC now? (1/3)
For more: https://t.co/BZ84GMKdR4https://t.co/A8aHz7H2FO
— Federal Reserve (@federalreserve) April 13, 2022
Additionally, it has released a set of FAQs on a CBDC, explaining why it is considering it now. The Fed says it is the “right time” to consider a digital dollar, given technological advances ushering in a wave of new private-sector financial products and services.
CBDCs could potentially offer a range of benefits, said the bank. For instance, a digital dollar could provide households and businesses with a convenient, electronic form of central bank money, offer entrepreneurs a platform to create new financial products and services, and support faster and cheaper payments.
The FAQ document also laid out a slew of possible risks associated with CBDCs.
“A CBDC could pose certain risks and 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.”