On Thursday, the Federal Reserve launched a review on the potential benefits and risks involved with the launch of a central bank digital currency (CBDC) in the nation. Several countries around the world are exploring the possibility of a digital currency as the private sector has trail blazed ahead of governments with private innovations. The fed has released a paper on this issue.
Private currencies like the Bitcoin, Ethereum and more do not have backups and are extremely volatile, but have become popular and are used by many, all around the world. A digital version by the Fed would not only be issued by the Central Bank but will also be backed by the U.S. bank.
In the paper released on Thursday, the Fed said that “the introduction of a CBDC would represent a highly significant innovation in American money.” It also stated that it was “considering how a CBDC might fit into the U.S. money and payments landscape.”
A spokesperson told Barron’s that the Treasury Department welcomed the “Federal Reserve’s paper” and called it an “important step forward in the public discussion about central bank digital currencies.”
The fed has taken a well rounded approach as it has laid out both the pros and cons of CBDCs. It has explained the complex factors that are involved but has also pointed out that the nation is far behind the world in the adaptation of a digital currency and the issue has to be discussed, now.
There are 23 CBDCs that have been formally launched or are in pilot stage, globally. There are 87 countries exploring the launch of digital currency which represents 90 percent of the world’s gross domestic product (GDP). Nine countries have fully launched a digital currency. The U.S. has lagged behind many countries as there are a lot of mixed feelings in the nation about the launch of a digital dollar.
Since the release of the paper in the U.S., there is a 120 day period for public comment. The fed has said that it would not proceed forward until it gets approval from Congress. Lawmakers are divided on the issue but not on partisan lines.
