U.S. Federal Reserve Examines Pros and Cons of Launching a Central Bank Digital Currency
Summary:
The governing body of the U.S. Federal Reserve System has shared a study on the potential benefits and drawbacks of launching a central bank digital currency (CBDC). The paper addresses concerns over how the dollar would fair against foreign CBDCs and the possibility of the dollar losing dominance in international transactions. While CBDCs are considered a high priority for federal policymakers, there is significant political division on the matter. A former U.S. president has pledged to block any CBDC initiatives if elected in 2024, and a small group of U.S. senators is aiming to ban the digital currency at home. A recent survey shows only 16% public backing for a CBDC in the U.S.
The governing body of the U.S. Federal Reserve System has issued a study examining the benefits and drawbacks of creating and implementing a government-issued digital currency, or central bank digital currency (CBDC), as a reaction to the similar actions of other global powers. Last year, Jerome Powell, the head of the U.S. Federal Reserve, stressed that a U.S. CBDC is a key priority for federal policymakers. A CBDC is essentially a governmentally regulated digital currency. Advocates suggest that an American CBDC would bolster the dollar's supremacy as the prevailing global currency. Critics, however, suggest it could create issues related to centralization, privacy violation, and the power of U.S. authorities to impound assets at their discretion. In this recently published paper, two senior economic analysts from the Fed explore the potential effects a U.S. CBDC could have on the status of the dollar in international transactions. The researchers' report that over 90% of central banks worldwide are investigating the possibilities of CBDCs, and similarly, the Fed is studying the potential impacts and options for a U.S. branded CBDC. The central worry by the study authors is how the dollar could fair in competition against foreign CBDCs if the U.S. fails to launch their own. The paper suggests that the dominance of the U.S. dollar as a global standard or safe asset is unlikely to be shaken by a solid and influential foreign CBDC beyond American jurisdiction. Conversely, the researchers caution that the dollar might lose its dominance for international transactions if the U.S. does not issue a competitive CBDC or if the design is not favored. The idea of a CBDC has been a source of political divide in the U.S. Donald Trump, former U.S. president and a potential candidate in the 2024 presidential race, has vowed to quash any initiative to produce a CBDC if he returns to the Oval Office. In addition, a group of five U.S. senators recently proposed legislation to outlaw CBDCs domestically. A recent survey conducted in May 2023 revealed that only 16% of U.S. respondents backed the idea of a CBDC.
Published At
2/27/2024 7:53:28 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.