It’s Official: the FED Is Considering a CBDC

The United States Federal Reserve Board made a historic announcement on Wednesday after stating that the central banking system is officially considering the development of a Central Bank Digital Currency (CBDC).

In a thread posted on Twitter, the U.S. financial authority declared that no decision on issuing a national digital currency has been made yet. Nevertheless, the FED board has been exploring “the potential benefits and risks of CBDCs from a variety of angles”, including technological research and experimentation.

The institution further explained the reasons for why it is now considering CBDCs, arguing that the global situation has changed, and central banks worldwide must adapt to it in order to promote monetary and financial stability, as well as efficiency in the payment system:

“With technological advances ushering in a wave of new private-sector financial products and services, including digital wallets, mobile payment apps, and new digital assets such as cryptocurrencies and stablecoins, the Federal Reserve and other central banks around the globe are exploring the potential benefits and risks of issuing a CBDC,” the FED stated.

In terms of the key potential benefits behind digitized national currency, the FED named its ability to provide households and businesses with “a convenient, electronic form of central bank money with the safety and liquidity that would entail.” It also noted that a CBDC could act as a platform with which create new financial products and services for entrepreneurs, as a digital dollar could “support faster and cheaper payments (including cross-border payments) and expand consumer access to the financial system.”

Among the biggest risks with CBDCs, the US financial authority highlighted the unclear impact and effect of digital money on the financial-sector’s market structure, the cost and availability of credit, the safety and stability of the financial system, and the efficacy of monetary policy.

The World Is Interested

The world’s largest economy, the United States, becomes one of the latest countries to join the growing list of nations exploring CBDC.

The Bahamas issued its own CBDC called the ‘Sand Dollar’ back in 2020, becoming the world’s first country with a digitalized national currency. In the same year, China engaged in its own CBDC trials and is currently running pilot digital yuan programs in 12 local cities, including the capital Beijing, and Shanghai.

Multiple other countries, including EU member states, have also joined the club. As the estimations of accountant giant PwC says, around 80% of the world’s central banks are considering launching a central bank digital currency (CBDC), or have already done so.