The Federal Reserve will review potential implementation of the CBD in the United States
The US Federal Reserve has released its plans to begin reviewing the risks and benefits of issuing a US digital currency, or central bank digital currency (CBDC), in accordance with the current global trend, the Wall Street Journal reports. Previously, Hong Kong issued one of its first technical papers for its CBDC.
Although the review process has begun, a final decision may not be finalized any time soon while officials remain divided on the issue. Unlike private cryptocurrencies similar to Bitcoin and Monero, the country’s CBDC will be fully backed by the central bank, which is a government entity just like the actual fiat currency.
The Federal Digital Dollar app may be a solution to a faster and cheaper way to transfer money. The government will be able to distribute financial aid to people who do not have a bank account or are unable to receive money in the traditional way.
Federal Reserve Chairman Jerome Powell stated that the regulator is looking to find a safer and more stable solution rather than being one of the world’s first issuers. The Chairman’s concern is related to the crucial role of the dollar as a global currency.
Powell and other Federal Reserve officials said the review would be early and aimed at determining whether the state should consider it an option. The goal of the committee is to think about the problem and determine whether it has clear and tangible benefits over the risks and costs that come with future development.
The review process will begin with issuing an analysis of the issue and soliciting public opinion. But this is unlikely to include policy recommendations.
CBDC advocates usually note two main advantages of cryptocurrencies: improved speed and security. The flexibility of central bank digital currencies allows monetary policies that include interest rate manipulation to be implemented directly on the accounts of digital currency holders.