Fed Launches Review of Possible Central Bank Digital Currency
Officials solicit public comment, but are unlikely to decide soon whether to issue a government-backed cryptocurrency
WASHINGTON—The Federal Reserve on Thursday launched a review of the potential benefits and risks of issuing a U.S. digital currency, as central banks around the world experiment with the potential new form of money to keep pace with private-sector payments innovations.
Fed officials have been divided on the matter, making it unlikely they will decide soon on whether to create a digital dollar. Unlike private cryptocurrencies like bitcoin, a Fed version would be issued by and backed by the U.S. central bank, a government entity, as are U.S. paper dollar bills and coins.
The central bank described Thursday’s long-awaited report as the first step in a discussion of whether and how a U.S. digital dollar could improve the safe and effective domestic payments system. The paper doesn’t favor any policy outcome, and the Fed said the release of the report isn’t meant to signal any imminent decision.
“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,” Federal Reserve Chairman Jerome Powell said in a statement.
The Fed will collect comments on the report for 120 days. The Fed said it would move to adopt such an offering only with the support of the nation’s elected leaders.
Advocates say a Fed digital dollar could make it faster and cheaper to move money around the financial system, bring into it people who lack bank accounts and provide an efficient way for the government to distribute financial aid.
Another motivating consideration: keeping up with other major jurisdictions considering a digital currency for domestic and international payments, Fed governor Lael Brainard said in remarks before the National Association of Business Economics in September.
“It’s just very hard for me to imagine that the U.S., given the status of the dollar as a dominant currency in international payments, wouldn’t come to the table in that circumstance with a similar kind of an offering,” she said.
However, Mr. Powell has indicated he sees reason for caution. He said last year that it is more important to get the digital dollar right than to be first to market, in part because of the dollar’s critical global role.
He and other Fed officials have said the Fed’s research is early and exploratory. He said 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.”