© Reuters.
Investing.com – The Federal Reserve released its long-awaited study on a digital dollar on Thursday, exploring the pros and cons of this hotly debated issue and seeking public comment.
Billed as “the first step in a public debate between the Federal Reserve and stakeholders on central bank digital currencies”, the move is careful not to comment on the launch of a central bank digital currency (CBDC) .
The Fed takes a neutral approach
Through its document, the Fed provides a comprehensive review of the pros and cons of a CBDC.
Among the benefits is the potential for accelerating the electronic payments system at a time when financial transactions around the world are already highly digitized.
Among the negatives discussed in the report are financial stability and privacy risks while guarding against fraud and other illegal issues.
“A CBDC could fundamentally change the structure of the U.S. financial system, altering the roles and responsibilities of the private sector and the central bank,” the report said.
The Fed advocates a collaborative approach
The Fed has chosen to involve players in the financial system. Thus, the document lists a checklist of 22 different points for which the Fed seeks the opinion of stakeholders. In addition, a period of 120 days is provided for the receipt of comments.
Fed officials say the report is the first step in a larger process, but there is no timeline for its conclusion. “We look forward to engaging with the public, elected officials, and a wide range of stakeholders as we consider the positives and negatives of a central bank digital currency in the United States.”
The central bank does not give recommendations
However, the Fed clarifies that it “is not intended to promote any specific policy outcome and does not take a position on the ultimate desirability” of the digital dollar.
Proponents of the digital dollar worry that the Fed’s delay in implementing central bank money will put it behind global competitors, including China, which has already rolled out its own product.
China’s advances in this area could threaten the US dollar’s hegemony as the world’s reserve currency.
However, Mr. Powell and other Fed officials say they have little concern about this aspect, stressing the need to get it right. “The introduction of a CBDC would represent a very significant innovation for the U.S. currency. As a result, broad consultation with the general public and key stakeholders is essential. This document is the first step in such a conversation.”
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